GBPUSD Holds Near 1.2700 as Iran Deal Optimism Offsets Gilt Spike, Election Fears

GBPUSD steadied near 1.2700 on May 7 as hopes for an Iran nuclear deal revival—potentially lowering energy prices and easing inflation—balanced rising UK election uncertainty and fiscal risks. The pair had pulled back to 1.3530 by May 4 amid a hawkish BoE hold at 3.75% (8-1 vote), but gilt yields spiked to 5.75% (30-year high since 1998) on May 6 alongside PMI services rebound to 52.7, steady 3.5% pay awards, and fears over Andy Burnham's £40bn borrowing proposal. This followed BoE's March 19 unanimous hold amid Iran war shocks flipping markets to price 73bp of hikes by year-end, with hawkish May comments from Bailey and Pill underscoring persistent inflation risks.