The pound was little changed on Wednesday as traders pared expectations of further interest rate rises from the Bank of England following in-line inflation data and news that Donald Trump had unveiled a plan to end the Iran conflict.
Read more: UK inflation held at 3% ahead of Iran war
The pound was steady against the dollar (GBPUSD=X), at $1.3418. It was a similar scenario versus the euro (GBPEUR=X), with the British currency trading at €1.1555.
It has recovered from a four-month low but remains under pressure against the dollar, which has been supported by safe-haven demand amid geopolitical tensions.
The US dollar index (DX-Y.NYB), which measures the currency against a basket of six major peers, dropped 0.2% to 99.21.
Stocks: Create your watchlist and portfolio
Money markets continue to price the Bank Rate rising from 3.75% to 4.5%, although expectations for a third increase have eased from 94% to 64%.
Sentiment was also supported by reports that the US had presented Iran with a 15-point proposal including a month-long ceasefire to enable further negotiations.
Zara Nokes, an analyst at JPMorgan Asset Management, said: “For the Bank of England, today’s inflation data is in effect old news, with attention now firmly on what is coming down the tracks as a result of the conflict in the Middle East.”
Read more: Stocks rise on reports of Trump offering 15-point ceasefire plan to Iran
“In my view, therefore, the Bank of England should not need to be hiking rates this year, and staying on hold for an extended period of time should be sufficient to anchor inflation expectations without compounding growth weakness.”
In equities, the FTSE 100 (^FTSE) was higher on Wednesday morning, up 1% to trade at 10,059 points at the time of writing. For more details on market movements, check our live coverage here.
Download the Yahoo Finance app, available for Apple and Android.