The British pound posted another bearish week, marking a second consecutive weekly decline for the GBP/USD pair, with geopolitical concerns — rather than domestic factors — acting as the primary driver. At present, market participants do not expect the Bank of England to resume rate cuts this year; instead, markets are pricing in around 50 basis points of tightening by year-end.

Supported by rates, but fragile underneath

Sterling has shown a reasonable degree of resilience recently, but the underlying picture appears more fragile.

On the surface, the move seems justified, as markets have sharply repriced expectations for Bank of England policy — shifting from anticipating rate cuts to the possibility of further tightening. This shift has provided strong support for the pound, helping it outperform most G10 currencies, with the exception of the US dollar and commodity-linked currencies.

However, this support is largely driven by a single factor.

Interest rates are the primary driver

The pound’s resilience is largely a rate-driven story.

UK short-term bond yields have moved sharply higher, as markets quickly abandoned easing expectations and shifted toward the possibility of additional tightening. Inflation risks — particularly those stemming from rising energy prices — have taken center stage.

This repricing has helped stabilize sterling, even as the broader macroeconomic backdrop remains far less convincing.

And herein lies the key issue: much of this support now appears to be already priced in.

A less comfortable macro backdrop

Looking at the broader picture, the UK economy still appears vulnerable.

Growth was already relatively weak before the latest geopolitical shock, and the economic mix is now tilting more clearly toward a stagflationary scenario, with inflationary pressures rising again while economic activity slows and the labor market begins to soften.

At the same time, familiar structural concerns have resurfaced, including the UK’s current account deficit and the economy’s sensitivity to higher borrowing costs.

This is where things become more complicated. While higher short-term interest rates typically support a currency, rising long-term yields tell a different story. The recent increase in UK gilt yields reflects growing concerns about fiscal sustainability and funding costs — factors that have not historically supported the pound.

Positioning improves, but lacks conviction

Investor positioning also plays an important role. Speculative accounts have clearly reduced bearish bets on sterling, with net short positions narrowing over the past three weeks. However, price action has not strongly confirmed this shift, with GBP/USD trading around the 1.3300–1.3400 range without meaningful upside.

This combination is telling. What we are seeing appears more like gradual short covering rather than the establishment of genuine bullish positions. Investors are stepping back from negative bets but have yet to commit to long-term long positions.

Declining open interest reinforces this view, indicating position reduction rather than fresh inflows.

The conclusion is relatively clear: positioning has become less negative, but not yet positive. If prices fail to follow through with stronger gains, this adjustment could lose momentum — especially if economic conditions deteriorate or the US dollar strengthens further.

Energy and political risks in the background

In the background, two key risks are gradually building.

The first is energy. Prices are expected to rise, as the UK imports more than it exports, complicating the balance between inflation and growth and keeping stagflation risks elevated.

The second is political. With UK elections approaching, political noise is likely to intensify. Any shifts in expectations around fiscal policy or political leadership could quickly impact gilt markets — and, by extension, the currency.

What comes next for GBP/USD?

Base case: range-bound with a slight downside bias

The pair is likely to continue trading within the 1.3200–1.3500 range, with a mild downside bias. While the repricing of Bank of England policy continues to provide some support, its momentum is beginning to fade as markets question how far tightening can go in a weak growth environment. Meanwhile, the US dollar remains relatively firm.

Bullish scenario: requires a clear catalyst

A meaningful upside move would require a shift in conditions. The dollar could weaken if US data comes in softer than expected or if the Federal Reserve signals a more dovish stance. This could allow the pair to break above 1.3500. Stabilizing energy costs or an improvement in global risk sentiment could also help, potentially turning improved positioning into sustained long accumulation.

Bearish scenario: risks skew to the downside

The downside path appears more straightforward. If the dollar continues to strengthen, geopolitical tensions escalate, or UK gilt markets come under further pressure, the pound could weaken. A sharper economic slowdown or rising fiscal concerns could push the pair toward the 1.3000–1.3100 range, particularly if bearish positioning begins to rebuild.

What to watch

The most immediate driver remains the trajectory of the US dollar, particularly through interest rate movements and Federal Reserve policy expectations. Other key factors include oil price dynamics, developments in the Middle East conflict, volatility in UK gilt yields, and incoming UK economic data — especially on growth and the labor market.

Bitcoin traded largely unchanged on Friday and is heading for a muted weekly close, as investors assess mixed signals surrounding the conflict between the United States and Iran while awaiting key US labor market data due later today.

The world’s largest cryptocurrency was recorded at $66,654.7 as of 02:19 a.m. Eastern Time (06:19 GMT), showing little change.

Bitcoin is expected to end the week with limited movement amid lower trading volumes, as many global markets were closed for the Good Friday holiday, reducing investor participation in digital asset trading.

Investors monitor Iran war and US jobs data

Bitcoin briefly climbed toward $68,000 earlier this week after signs of easing tensions in the Middle East, but those gains faded after Donald Trump adopted a more hawkish tone toward Iran.

Recent remarks included threats to target infrastructure such as bridges and power stations, which weighed on risk appetite across markets.

At the same time, economic uncertainty has made traders more cautious ahead of the US nonfarm payrolls report, which could influence Federal Reserve policy expectations and overall market liquidity.

Despite recent volatility, Bitcoin has shown relative resilience after recovering from sharp losses earlier triggered by the conflict. However, it remains well below its 2025 peak above $126,000, reflecting a broader slowdown in crypto markets this year.

Altcoins trade cautiously

Most alternative cryptocurrencies also moved within a narrow range on Friday amid cautious market sentiment.

Ethereum, the second-largest cryptocurrency, rose 0.4% to $2,058.92, while XRP gained 0.2% to $1.32.

The US dollar rose sharply on Thursday after two consecutive sessions of losses, following a speech by Donald Trump on Iran that undermined market expectations of a swift end to the conflict, reviving demand for safe-haven assets.

Trump pledged to launch more intense strikes on Iran over the next two to three weeks in a televised address on Wednesday evening, without providing a clear timeline for reopening the Strait of Hormuz or ending the war that has unsettled investors and disrupted markets.

The Iranian military responded by warning the United States and Israel of “more severe, widespread, and destructive attacks” in the future.

The dollar also strengthened against other safe-haven currencies such as the Swiss franc and the Japanese yen.

The dollar rose 0.6% to 0.799 against the Swiss franc, while gaining 0.5% against the Japanese yen to ¥159.57, approaching the key psychological level of ¥160 — a threshold that heightens concerns about potential intervention by Japanese authorities in the foreign exchange market.

Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said: “Over the past two days, there had been some optimism that the war would end soon, but President Trump’s speech yesterday undermined those hopes.”

He added: “He didn’t really say anything new, but he didn’t provide any signals to support optimism. This is the only fundamental factor that matters to markets right now: if you think the war will end soon, you buy risk assets; if you think it will continue, you sell risk.”

The euro fell 0.45% to $1.1536, while the British pound declined 0.63% to $1.3222, giving up part of their recent gains.

The dollar index, which measures the US currency against a basket of currencies, rose 0.46% to 100.02.

Scotiabank analysts led by Shaun Osborne said in a note to investors that the tone of Trump’s speech heightened market concerns, particularly after his comments about intensifying strikes over the next two to three weeks and the possibility of targeting Iran’s power infrastructure if no agreement is reached.

They added that the market reaction was swift, with most of the week’s gains in G10 currencies nearly erased.

In energy markets, Brent crude futures rose 7.78% to settle at $109.03 per barrel, after Trump’s speech reignited concerns over continued supply disruptions.

Markets await US jobs report

Initially, Trump’s remarks pushed US Treasury yields higher, but those gains were later pared. The yield on benchmark 10-year US Treasury notes fell by 1.6 basis points to 4.305%.

Investors are also awaiting the US nonfarm payrolls report due on Friday for signals on the strength of the economy and the likely path of Federal Reserve interest rates.

According to a Reuters poll, economists expect around 60,000 jobs to have been added in March.

Meanwhile, the Australian dollar fell 0.3% against the US dollar to $0.6904, while the euro rose 0.12% against the Swiss franc to 0.921.

The euro declined at the start of European trading on Friday against a basket of global currencies, extending its movement in negative territory for the second consecutive day against the US dollar, amid subdued trading conditions in the foreign exchange market due to the Good Friday holiday.

Demand for the US dollar as a preferred safe-haven asset resumed following US President Donald Trump’s address on developments in the Iran war, which included more aggressive remarks than markets had anticipated.

With eurozone inflation exceeding the European Central Bank’s medium-term target due to rising energy prices, expectations have increased for at least one interest rate hike this year, as markets await further key economic data from the region.

Price Overview

Euro exchange rate today: the euro fell about 0.1% against the dollar to $1.1532, down from the session opening level of $1.1538, with a session high of $1.1545.

The euro ended Thursday’s session down 0.45% against the dollar, marking its first loss in three days, following Donald Trump’s remarks on the war with Iran.

US dollar

The dollar index rose about 0.1% on Friday, holding gains for the second consecutive session, reflecting continued strength in the US currency against a basket of global currencies.

Dollar buying as a preferred safe-haven asset resumed following US President Donald Trump’s address to the nation on developments in the Iran war, during which he confirmed that the United States will continue the war with Iran in the coming weeks.

Later today, the US nonfarm payrolls report for March is due, a key indicator closely watched by the Federal Reserve in determining appropriate monetary policy tools for the world’s largest economy, providing strong signals on the path of US interest rates throughout this year.

European interest rates

European Central Bank President Christine Lagarde said last week that the bank is prepared to raise interest rates even if the expected rise in inflation is temporary.

Data released on Tuesday showed that eurozone inflation exceeded the ECB’s target, reaching 2.5% in March amid rising energy prices.

Following the data, money markets increased pricing for the probability of a 25 basis point rate hike by the European Central Bank at the April meeting from 30% to 35%.

Reuters sources indicated that the ECB is likely to begin discussions on raising interest rates at this month’s meeting.

To reassess these expectations, investors are awaiting further economic data from the eurozone on inflation, unemployment, and wages.