02.04.202607:32:25UTC+00Sterling Slides as Trump’s Address Deepens Middle East Uncertainty

The British pound slipped toward $1.32, approaching its weakest level since late November, as investor caution returned following President Donald Trump’s prime-time address, which offered no clear timeline for resolving the Middle East conflict. Trump stated that the US operation was nearly complete but pledged to intensify actions over the next two to three weeks, including potential strikes on power infrastructure. The absence of any new rationale for the war further dampened market sentiment.

The renewed uncertainty, coupled with persistent inflationary pressures, has led investors to reassess expectations for Bank of England policy. Markets now anticipate two interest rate hikes in 2026, a shift from the previous four sessions, when bets on tightening had been scaled back to fewer than two hikes as of yesterday’s close. Nonetheless, this projection remains below last week’s peak, when traders briefly priced in as many as four increases. The repricing comes despite recent remarks from Bank of England Governor Andrew Bailey, who cautioned that markets were overstating the likelihood of further rate hikes.