The Japanese Yen (JPY) remains near its year-to-date low against the US Dollar (USD), consolidating around the mid-159.00s during the Asian session on Thursday, close to its highest level since July 2024, reached earlier this month [1]. This underperformance is attributed to concerns that the war-driven surge in energy prices could negatively impact Japan's trade balance and economic outlook, potentially leading to stagflation and complicating the Bank of Japan's (BoJ) normalization efforts [1]. Additionally, persistent USD strength, fueled by hawkish US Federal Reserve (Fed) expectations, continues to support the USD/JPY pair, with traders nearly pricing out further Fed rate cuts and increasing bets for a hike by year-end [1]. However, fears of intervention by Japanese authorities are limiting further downside for the Yen [1].
Meanwhile, the Pound Sterling (GBP) has moved little, remaining flat around 1.3360 after two days of losses during the Asian trading hours on Thursday [2]. The GBP/USD pair is steady as the USD holds firm, with traders closely monitoring developments in the Middle East amid ongoing uncertainty over US-Iran peace talks [2]. The White House confirmed that talks are ongoing, with the Trump administration sending a 15-point proposal to Iran via Pakistan to resolve the conflict [2]. Senior Iranian officials are reviewing the US proposal but have indicated no willingness to engage in talks with Washington, instead proposing a five-point plan that includes sovereign control over the Strait of Hormuz [2].
Market reactions have been muted for both currencies, with the GBP potentially finding support from easing oil prices amid hopes of de-escalation in the Middle East [2]. UK inflation data for February showed headline CPI steady at 3%, matching expectations, while core CPI edged higher to 3.2%, surpassing the 3.1% forecast; however, these pre-conflict figures had limited impact on sentiment [2]. UOB economist Lee Sue Ann noted a hawkish shift by the Bank of England (BoE), with the Bank Rate held at 3.75% following a unanimous 9–0 vote, and projections now suggesting the GBP Repo Rate will remain at 3.75% through Q4 2026 as inflation risks persist, removing earlier expectations for three rate cuts in 2026 [2].
Geopolitical uncertainty, particularly regarding the US-Iran conflict and the potential for further escalation due to additional US troop deployments, continues to overshadow market sentiment and support the USD's global reserve currency status [1][2]. While intervention fears are capping the upside for USD/JPY, the GBP/USD pair remains steady as traders await further clarity on peace talks and oil price movements [1][2].
CONCLUSION
Both the Japanese Yen and Pound Sterling are trading near recent lows against the US Dollar, with market sentiment subdued amid ongoing Middle East tensions and uncertainty over US-Iran peace talks. Intervention fears are limiting further Yen weakness, while the GBP may find support if oil prices ease and the Bank of England maintains a hawkish stance. Overall, geopolitical risks and central bank policy expectations are keeping currency markets cautious.