GBP rose for a third day, gaining more than 1.10% as broad US Dollar selling followed improved risk appetite after a two-week US–Iran truce. GBP/USD traded at 1.3431, after reaching a five-week high of 1.3484 earlier in the session.
US President Donald Trump agreed to a two-week truce, linked to Iran reopening the Strait of Hormuz, and said the US had met its military aims. He said Iran sent a 10-point proposal and called it a workable basis for talks.
Truce And Market Reaction
A senior Iranian official said the Strait of Hormuz could reopen on Thursday or Friday ahead of a meeting in Pakistan, if a framework is agreed. Trump also warned of 50% tariffs, effective immediately, on countries supplying military weapons to Iran.
A drone attack hit Saudi Arabia’s east–west oil pipeline, and Kuwait reported fires at several energy sites, including power stations, with “severe material damage” to infrastructure, generation units, and fuel tanks. Oil prices fell, while the US Dollar Index (DXY) dropped 0.70% to 98.79, and gold reached a daily high past $4,800.
Markets priced nearly 10 basis points of Federal Reserve easing by year-end, according to Prime Market Terminal, ahead of the Fed’s meeting minutes release. In the UK, expectations shifted from at least two Bank of England rate rises to one rise towards year-end.
We should recall the sharp rally in GBP/USD back in 2025 when the US-Iran truce was announced. The pair surged over 1.10% in a single day as broad US dollar weakness took hold. This event reminds us how quickly geopolitical de-escalation can shift currency markets away from safe havens.
That rally was fueled by a classic risk-on move, with falling oil prices easing inflation fears and boosting sentiment for currencies like the Pound. Central bank expectations shifted instantly, with rate hike bets on the Bank of England being trimmed and easing priced in for the Fed. We saw then how sensitive rate expectations are to sudden geopolitical shocks and their impact on energy prices.
Lessons From The 2025 Rally
However, we must also remember the fragility of that 2025 ceasefire, which was immediately tested by drone attacks in the region. This capped the initial rally and served as a crucial lesson that relief rallies can be short-lived if the underlying stability is not secure. The upside was limited by the technical resistance around the 1.3450 area, showing that major trend lines still command respect.
Looking at the situation now in April 2026, we see a similar dynamic, although less dramatic, with renewed diplomatic talks between the US and Iran underway. The US dollar has already softened this past month, partially due to the latest Non-Farm Payrolls data for March 2026 coming in at just 175,000, missing the consensus forecast of 210,000. This has weakened the case for Fed hawkishness and is providing a tailwind for sterling.
Furthermore, the UK’s inflation picture is complicating the Bank of England’s position, as the last CPI reading for March 2026 registered at 2.8%, above the expected 2.6%. This persistent inflation, combined with a softer dollar, is underpinning the pound’s current strength. GBP/USD is now hovering near 1.3650, approaching a key resistance level we haven’t seen since last year.
Given the memory of the explosive 2025 rally, traders should consider buying short-dated GBP/USD call options to position for a potential diplomatic breakthrough. This strategy defines our risk to the premium paid while offering significant upside if a positive headline sparks a rapid move through resistance. The implied volatility on sterling options has been relatively low, making this an attractive way to play for a surprise move.
At the same time, the lesson of 2025’s fragile truce means we should remain cautious of a sudden reversal if talks break down. For traders looking to hedge, purchasing put options with a strike below the recent support of 1.3500 could protect against a sharp downturn. This balanced approach prepares us for the heightened volatility that typically surrounds such sensitive negotiations.
