The Bank of England held interest rates at 4.5% in a 7-2 split decision, while advancing Iran nuclear negotiations pushed oil prices lower on expectations of increased crude supply.
Brent crude slid 2% to $78.50 on reports of advancing Iran nuclear negotiations. A deal would lift sanctions, allowing Iran to export more oil, adding to global supply at a time of tepid demand growth.
Iran is estimated to have 30-50 million barrels in floating storage and could ramp up production by 500,000 b/d within months of a deal, adding over 1% to global supply.
Brent broke below $79 support, with next major support at $76.50, the 200-day moving average. A rebound above $80.50 would negate the bearish bias.
WTI tends to move in tandem with Brent, though the spread may widen if Iranian barrels target Asian markets, potentially benefitting Brent-linked contracts.
GBP/USD fell 0.4% to 1.2680 after the BoE held rates at 4.5% by a 7-2 vote. Markets had partially priced a more dovish tilt, but the majority’s cautious stance on services inflation and the Iran deal delayed expectations of near-term easing.
The pound slipped as the BoE held rates, with only two dissenters pushing for a cut. Markets had anticipated a slightly higher chance of a dovish signal, and the stable rate kept sterling under pressure amid a stronger dollar.
Support is at 1.2610, the late May low; a break below could accelerate losses toward 1.2500. Resistance is at 1.2750, the pre-decision level.
A successful Iran deal could ease global energy costs, potentially reducing UK inflation and increasing the odds of BoE rate cuts later in 2026, which might weigh on sterling.
EUR/GBP edged higher to 0.8540 as sterling weakened after the BoE hold. The pound's decline against the dollar also lifted the cross, though euro zone political uncertainty limited upside.
The pound weakened on the BoE's cautious stance, while the euro held steady, pushing the pair higher. It reflects relative policy divergence with the ECB already cutting rates.
Resistance at 0.8570 (50-day MA); a break targets 0.8640. Support is at 0.8480, the June low.
UK 10-year gilt yields dipped 3 basis points to 4.12% as the BoE hold reinforced expectations that rates will stay elevated for longer, but the dovish dissent and slower growth outlook weighed on yields.
Gilt yields edged lower as the decision confirmed no immediate easing, but the two dissenters and the growth concerns kept long-end yields in check.
The curve flattened slightly, with 2-year yields falling more than 10-year, suggesting markets see the BoE on hold for longer but eventual cuts.
DXY firmed to 104.20 as sterling weakness and oil slide boosted the dollar. The geopolitical uncertainty from Iran talks also lent support to the safe-haven greenback.
The dollar firmed as sterling, a major DXY component, fell after the BoE held rates. Additionally, lower oil prices reduced demand for commodity-linked currencies like CAD and NOK, further boosting the DXY.
DXY faces resistance at 104.50; sustained strength depends on US data and Fed policy outlook. If upcoming PCE inflation shows cooling, the dollar rally may fade.
The Bank of England voted 7-2 to keep its benchmark rate at 4.5%, defying calls for a cut despite slowing UK growth. Dovish dissenters Swati Dhingra and Catherine Mann argued for easing, but the majority cited sticky services inflation and watchfulness over the Iran nuclear deal talks. Meanwhile, progress toward an Iran nuclear agreement pressured Brent crude lower, with a potential supply boost from eased sanctions weighing on oil markets.
The Bank of England maintained its benchmark rate at 4.5% in a 7-2 split vote, with two members dissenting in favor of a cut.
Policymakers were concerned about sticky services inflation, which remained at 5.7%, and wanted to see how global events — particularly the Iran nuclear negotiations — unfolded before easing policy.
Negotiations reportedly advanced, with Iran signaling concessions on enrichment levels, raising hopes for a revived agreement that would lift oil sanctions and increase crude exports.