President Donald Trump and his national security team meet in the Situation Room of the White House, Saturday, June 21, 2025. Official White House Photo by Daniel Torok.
The British Pound is higher after U.S. President Donald Trump said a ceasefire between Israel and Iran "is now in effect".
This marks a dramatic de-escalation in a conflict that threatened to rapidly expand following U.S. strikes on Iranian nuclear facilities, which risked Iran shutting the critical Gulf of Hormuz in retaliation.
However, a truce deadline of 5am BST is in force today, and this is boosting investor morale.
Oil prices have fallen and the Dollar is lower as a result: the Pound to Dollar exchange rate (GBP/USD) is quoted at 1.3564, having been as low as 1.3371 yesterday.
With stocks trading higher in Asia, and Europe and the U.S. set to follow, implied volatility has dropped, and this is helping the Pound against the Euro: The Pound to Euro exchange rate (GBP/EUR) has risen from 1.1642 to 1.1687.
Currencies that are highly sensitive to broader sentiment, like the Australian and New Zealand Dollars, are leading the gains.
Iran yesterday attacked a U.S. base in Qatar in response to the weekend attack by the U.S. on Iran's nuclear facilities.
The base had previously been evacuated, leading investors to see this as a low-risk and symbolic retaliation that would allow Iran to back down.
"Iran had previously threatened to block the Strait of Hormuz, which is one of the world's most important transport routes for oil and natural gas, and the fact that Iran did not attack energy-related targets caused oil prices to fall and stock markets to rise," says Elisabet Kopelman, U.S. Economist at SEB.
"So far, a ceasefire – or at least the averted risk of extended conflict – seems to be the main assumption in the markets," she adds.
A de-escalation in the conflict should allow GBP/EUR to extend a recovery; however, upside will likely be limited owing to the UK's slowing economy and the heightened odds that the Bank of England will accelerate the interest rate cutting cycle.
The GBP/USD, on the other hand, has a greater propensity to rise, given it is largely driven by the U.S. side of the equation, where a multi-month devaluation is underway.
The GBP/AUD, GBP/NZD and GBP/CAD all have scope to decline as Pound Sterling gives way to those currencies that lost ground when tensions were rising.