On Wednesday, both GBP/USD and EUR/USD currency pairs advanced as optimism surrounding renewed US-Iran peace talks weighed on the US Dollar (USD), which continued to trade near a six-week low. GBP/USD held steady around 1.3570, with the pair extending its constructive tone after reclaiming key simple moving averages, hinting at a bullish near-term bias while the uptrend structure remains intact [1]. EUR/USD traded around 1.1800, hovering near one-month highs and marking its eighth consecutive day of gains, largely driven by USD weakness rather than strong Euro fundamentals [2].
US President Donald Trump signaled that the war with Iran could be nearing its end, stating that “amazing two days” lie ahead and negotiations could take place “over the next two days” in Pakistan [1][2]. The Washington Post reported that the Pentagon is preparing to deploy thousands of additional troops to the Middle East, while the Pakistani military confirmed Field Marshal Asim Munir’s arrival in Tehran to help narrow gaps between the two countries [1][2]. Despite these developments, uncertainty remains elevated as last week’s talks ended without a breakthrough and the US imposed a naval blockade on the Strait of Hormuz [2].
Market sentiment has been positive, acting as a headwind for the safe-haven appeal of the USD. Wall Street cheered the possibility of an extended ceasefire, and US equities extended their gains [1]. Oil prices have eased from recent highs on hopes of de-escalation, but remain above pre-conflict levels, keeping inflation risks in focus for central banks [2].
On the monetary policy front, Cleveland Fed President Beth Hammack commented that rates are likely to remain on hold “for a good while,” seeing no imminent need for a change in interest rate settings [1][2]. In contrast, the Bank of England (BoE) is expected to tighten policy by 38 basis points towards the end of the year, favoring further upside for GBP/USD due to a higher rate differential [1]. BoE’s Megan Greene remains concerned about price pressures, noting it could take months to see the impact of the energy shock on the British economy [1]. Meanwhile, ECB policymaker Joachim Nagel stated that the April policy decision will depend on developments around the Strait of Hormuz, with no pre-commitment on rates and a continued focus on price stability [2].
Looking ahead, traders are awaiting UK GDP figures, expected to improve from no growth to 0.1% MoM in February, and Eurozone inflation data due Thursday, after preliminary data showed inflation rising above the ECB’s 2% target due to higher oil prices [1][2].
CONCLUSION
Renewed hopes for US-Iran peace talks have weakened the US Dollar, boosting GBP/USD and EUR/USD as geopolitical uncertainty persists. Central banks remain cautious, with the Fed expected to hold rates and the BoE and ECB monitoring inflation risks driven by elevated oil prices. Upcoming economic data releases in the UK and Eurozone will be closely watched for further market direction.