The Pound US Dollar (GBP/USD) exchange rate fell sharply ahead of the Easter weekend after US President Donald Trump’s speech triggered fresh anxiety around the crisis in the Middle East, with the US Dollar strengthening on safe-haven demand.

DAILY RECAP:

The US Dollar (USD) surged following President Donald Trump’s update on the Iran war, which led to a sharp deterioration in market risk appetite.

Having previously indicated that the war would end within weeks and that Iran wanted a ceasefire, markets had been hopeful that Trump’s address would outline steps towards de-escalation.

Although Trump reiterated that the war would be over within weeks, he also warned that the US would strike Iran ‘extremely hard’ during that time, reviving geopolitical fears.

This shift in tone prompted a flight to safety, with demand for the US Dollar strengthening into the Easter break.

Meanwhile, the increasingly risk-sensitive Pound (GBP) came under pressure amid the risk-off mood.

A concurrent rise in UK bond yields added to Sterling’s weakness, as fading hopes for peace fuelled concerns about a prolonged inflation shock and higher government borrowing costs.

GBP/USD Exchange Rate Forecast: Non-Farm Payrolls in Focus

With markets now reopening after the Easter weekend, attention has turned to last Friday’s US non-farm payrolls release.

March’s payrolls surprised to the upside, printing at +178K, well above forecasts of 65K and rebounding from February’s -92K decline.

The stronger-than-expected labour market data has helped to underpin the US Dollar at the start of the week, as it dampens expectations for near-term Federal Reserve interest rate cuts.

Looking ahead, GBP/USD movement is likely to remain sensitive to developments in the Middle East.

If geopolitical tensions remain elevated, safe-haven demand could continue to support the US Dollar.

However, any renewed optimism around de-escalation could see USD give back some gains, allowing the Pound to recover.