On Tuesday, the British pound gained over 0.20% against the dollar amid expectations of a potential ceasefire agreement. However, agency reports indicate that the likelihood of a deal remains low, increasing the risk of a U.S. strike as the deadline set by Donald Trump approaches.

Appetite for risk is declining due to further escalation of the conflict in the Middle East, which is slowing the pound's rise.

Oil is becoming more expensive, but the U.S. dollar has not gained notable support, despite its traditionally positive correlation with WTI prices, as the U.S. Dollar Index (DXY), which reflects the currency's performance against a basket of six major currencies, fell by 0.14% to 99.86.

Previously, the U.S. struck the island of Kharg, prompting Iran to respond with attacks on American interests in the UAE, Iraq, and Saudi Arabia. The media reported a suspension of diplomatic contacts between Washington and Tehran; however, the Tehran Times refuted this, stating that "diplomatic and indirect channels of negotiation with the U.S. are not closed."

Economic data from the U.S. indicated that durable goods orders fell for the second consecutive month in February, dropping by 1.4% against an expected decline of 0.5%, while orders for capital goods exceeded forecasts, increasing by 0.8% month-over-month against an anticipated 0.5% rise.

The head of the New York Federal Reserve, John Williams, stated that the energy shock will accelerate overall inflation, noting that general inflation is expected to rise to 2.75% year-over-year by the middle of this year. He added that monetary policy is "at the level where it should be."

Meanwhile, the March survey of consumer expectations from the New York Fed showed increased pessimism among households about prices: one-year inflation expectations rose to 3.4% from 3% in February, three-year expectations increased to 3.1% from 3%, and five-year expectations remained at 3%.

Despite the GBP/USD pair's confident growth, business activity in the UK services sector notably slowed in March, dropping to an 11-month low, as the S&P Global Services PMI index fell from 53.9 to 50.5. At the same time, rising raw material and input prices are intensifying the risk of stagflation in the British economy.

Against this backdrop, the GBP/USD pair has partially retraced its earlier gains, and the U.S. dollar appears to be regaining its footing amid increasing speculation about the low likelihood of a deal, as reported by MS NOW, citing diplomats. The table below reflects the percentage change of the British pound against major currencies over the week, with the British currency rising most against the Japanese yen.