Sterling and the euro registered modest gains on Wednesday as markets drew comfort from the Senate testimony of Federal Reserve Chair nominee Kevin Warsh, which affirmed the Fed's institutional independence but did not mark a shift in policy outlook.
As of 03:55 ET (07:55 GMT), GBP/USD was trading up 0.16% at 1.3525, inside a daily range of 1.3498 to 1.3535. EUR/USD was up 0.09% at 1.1754, holding well within a session band of 1.1734 to 1.1763.
Warsh, who appeared before the Senate on Tuesday, declined to make explicit policy pledges while strongly defending the Fed's independence. Market participants and analysts said that emphasis on institutional autonomy was sufficient to avert a sharp, Treasuries-driven rally in the dollar.
The dollar, measured by the DXY index, remained broadly rangebound and struggled to reclaim the 99 level as equity markets displayed resilience. The S&P 500 has climbed roughly 3% since the start of the US-Iran conflict, removing what might otherwise have been a support for a more sustained dollar rebound.
Analysts at ING pointed to the equity backdrop as a constraint on the dollar's ability to recover meaningfully. They noted that European equities have not fallen sharply enough to push EUR/USD decisively lower. ING said it expects the euro to consolidate around the 1.172-1.177 band unless there is tangible diplomatic progress, and that dip-buying is likely to appear around the 1.167-1.170 area.
Turning to sterling, UK inflation figures released on Wednesday contained few surprises. Energy prices lifted headline consumer price inflation while core services inflation remained broadly flat, a combination that supports expectations the Bank of England will keep interest rates on hold at its meeting next week.
ING reiterated its view that the Bank of England is likely to remain on hold through the end of the year, and that inflation is likely to peak near 3.5-4% rather than reaching levels that would compel an immediate policy response.
Political developments continue to add uncertainty for the pound. Markets are watching Prime Minister Keir Starmer's domestic standing ahead of 7 May local elections, where Labour is widely expected to underperform, creating another source of caution around sterling.
The wider geopolitical picture also remains unsettled. President Trump announced a last-minute ceasefire extension, while tensions in the Strait of Hormuz persist - the US blockade remains in place and there were fresh reports of an incident involving a UK container ship.
Market participants said that direction for GBP/USD and EUR/USD will likely continue to be driven by war-related headlines, movements in oil prices, and any additional commentary or signals from Fed officials.