Sterling Slides as Middle East Tensions and BoE Decision Loom

On Thursday, the British pound slipped against a robust U.S. dollar, just ahead of the Bank of England announcing its latest policy decision. Investors largely anticipate rates will remain unchanged, as tensions simmering in the Middle East keep market sentiments fragile.

The dollar saw a strengthening after the Federal Reserve's decision to keep rates steady on Wednesday. Increased safe haven demand, fueled by ongoing conflict in the Middle East and U.S. President Donald Trump's contemplations on involvement, played a crucial role. Despite the UK's economic slowdown and easing inflation rates in May, traders are betting the BoE will mimic the Fed's stance.

Analysis indicates a 96% probability of rates remaining unchanged, with a slim chance of a rate cut. Policymakers previously surprised markets with a three-way split on voting. Meanwhile, with rising oil prices linked to the Israel-Iran conflict and expected to drive inflation higher, the Bank of England confronts additional challenges. The ongoing economic landscape includes the UK's unique trade deal with the United States, finalized at a recent G7 summit by Trump and UK Prime Minister Keir Starmer.

(With inputs from agencies.)