Both the British Pound (GBP/USD) and the Euro (EUR/USD) traded flat during the Asian session on Thursday, as geopolitical tensions and central bank policy uncertainty weighed on market sentiment. The GBP/USD pair hovered around 1.3435, with the British Pound facing pressure from a sharp slowdown in UK inflation and rising unemployment. The UK headline Consumer Price Index (CPI) inflation eased to 2.8% year-over-year in April from 3.3% in March, coming in below the expected 3.0%. Core CPI also slowed to 2.5% from 3.1%, missing the market consensus of 2.6%. Additionally, the UK unemployment rate unexpectedly rose to 5.0% [1]. These data points led traders to scale back expectations for Bank of England (BoE) rate hikes by December, with UK rate futures now pricing in around 52 basis points of tightening, down from 60 basis points earlier in the week [1].
Similarly, the EUR/USD pair remained steady near 1.1625, with upside potential limited by ongoing uncertainty surrounding US–Iran negotiations. US President Donald Trump stated that talks with Iran were in the final stages but warned of further attacks unless a deal is reached. Iranian President Masoud Pezeshkian responded that Tehran would retaliate for any strikes with attacks beyond the Middle East, signaling persistent geopolitical risks [1][2]. These tensions are seen as supportive for the US Dollar, as investors seek safe-haven assets [1][2].
The US Federal Reserve's hawkish stance also contributed to USD strength. According to the April meeting minutes, a majority of Fed officials indicated that further interest rate hikes could be necessary if inflation remains above the 2% target [2]. In the Eurozone, a Reuters poll showed that about 85% of economists expect the European Central Bank (ECB) to raise its deposit rate by 25 basis points to 2.25% in June, up from just over half before the April meeting [2].
Market participants are awaiting the preliminary May Purchasing Managers' Index (PMI) readings from the UK, Eurozone, Germany, and the US, which are due later on Thursday and could provide further direction for the major currency pairs [1][2].
CONCLUSION
Major currency pairs are trading flat as markets digest cooling UK inflation, rising UK unemployment, and heightened US-Iran tensions. Central bank policy expectations remain fluid, with traders scaling back BoE rate hike bets and anticipating a possible ECB move in June. Upcoming PMI data may provide additional clarity for market direction.