First Light News: Trump announces timeline on possible Iran strike; BoE dovish tilt

Good morning, everyone,

While attacks from both sides in the Israel-Iran conflict continued overnight, US President Donald Trump, like the US Federal Reserve, appears to have adopted a ‘wait-and-see’ stance for now in terms of whether the US will get involved.

According to a statement from the President, relayed by White House press secretary Karoline Leavitt: ‘Based on the fact that there is a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks’.

Leavitt emphasised that any diplomatic agreement must guarantee that Iran cannot enrich uranium or develop a nuclear weapon.

A two-week window for diplomacy?
Despite earlier gains, Brent Crude prices have fallen around 2.0% today amid the two-week window offered by Trump regarding the Israel-Iran situation, essentially leaving the door open for a diplomatic resolution to avert major escalation.

Additionally, the UK and European counterparts are heading to Geneva today for talks with Iran to press for a diplomatic solution. The big question, of course, is whether this meeting will be enough to sway Trump. How these talks will change the direction of the narrative we are currently on is a tricky one to answer, I believe. However, they may provide a clearer ‘general level’ of understanding about where Iran is positioned.

Another point to consider is that the two-week window remains somewhat arbitrary; we do not have a fixed date, and let’s be frank, Trump has used the ‘two-week’ phrase on several occasions in the past. Beyond this, it remains uncertain.

BoE holds steady, but vote split takes a dovish tilt
In a more divided vote than expected, the Bank of England (BoE) maintained the bank rate at 4.25% amid geopolitical uncertainty yesterday. The decision to hold, along with the central bank’s ongoing commitment to a ‘careful and gradual’ approach, raised very few eyebrows.

Despite this, markets are pricing in an 80% probability of a 25-basis-point (bp) cut at August’s meeting. However, this is by no means certain; I feel that things can shift before then. BoE Governor Andrew Bailey commented that he ‘expects that the path of interest rates will continue to be gradually downwards’. Nevertheless, he cautioned that he was not providing a ‘prediction for August by saying that’.

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Publication date:

20 June 2025 - 11:49 (GMT)

Six out of the nine Monetary Policy Committee (MPC) members voted to leave the rate unchanged, while Swati Dhingra, Dave Ramsden and Alan Taylor voted to reduce the bank rate by 25 bps, to 4.00%. This was more divided than the market had expected; Refinitiv data indicated a 7-2 vote.

The move to hold rates comes despite considerable disinflation over the past two years, from a peak of 11.1% in October 2022 to 3.4% in May 2025 based on a year-on-year measure. The MPC noted that UK GDP growth (Gross Domestic Product) remains weak and the labour market continues to loosen. While pay growth is moderating and expected to slow further, inflation, as noted above, increased in May, primarily due to regulated prices and past increases in energy costs. Inflation is expected to remain at current levels for the remainder of the year, before gradually falling back towards the 2.0% target in 2026.

Despite progress, the MPC is keeping a close eye on elevated global uncertainty, particularly rising energy prices stemming from the conflict in the Middle East. The MPC stressed that monetary policy is not on a preset path and will continue to be restrictive to squeeze out persistent inflationary pressures.

Aside from UK retail sales data, which dropped in the last hour, the upcoming docket is reasonably light in terms of tier-1 events. UK retail sales numbers experienced a considerable drop, falling 2.7% in May – marking the largest decline since late 2023 – and reversing a 1.3% gain seen in April. Food stores’ sales volume saw a notable decrease, dropping 5.0%, as shown in the table below, down from a 4.7% gain, which was its largest monthly decline since mid-2021.

I am still closely watching the daily resistance between £0.8567 and £0.8546 on the EUR/GBP (euro versus the British pound) for a potential breakout move higher. While bears made a show yesterday, I feel that the said resistance remains in a vulnerable position, as I briefly described yesterday:

The EUR/GBP is currently trading at daily resistance between £0.8567 and £0.8546, an area complemented by monthly trendline resistance, drawn from the high of £0.9504. The caveat here is the lack of follow-through selling beyond monthly support at £0.8229-£0.8315, which signals buyers could be gaining strength. With that said, a breakout beyond the daily resistance zone underlined above could trigger a move towards daily resistance at £0.8616.

Charts created using Trading View

Written by FP Markets Chief Market Analyst Aaron Hill