Investing.com — Sterling edged lower on Monday, retreating from recent highs as the dollar firmed following renewed geopolitical tensions, with last trading at 1.3416, down 0.3% as of 03:20 ET (07:20 GMT).
The pound weakened after a strong run last week, as markets reacted to news that the U.S.–Iran peace talks failed to deliver a sustainable ceasefire, dampening risk appetite and supporting the greenback.
The dollar index rose, underpinned by higher oil prices after Washington signalled a naval blockade on Iranian exports, a move expected to tighten global supply and lift energy costs.
“The dollar has rebounded on failed peace talks in Islamabad, but it doesn’t need to rally too far,” analysts at ING said in a note.
also eased, trading at 1.1689, down 0.3%, although the pair remained above the 1.1600 level.
ING analysts said the downside was limited, noting that “something like 1.1700 looks a comfortable level for EUR/USD in the near term,” barring another sharp rise in energy prices.
Geopolitics remains the key driver across FX markets, with the Middle East situation continuing to influence both energy prices and broader risk sentiment.
While the latest developments have lent support to the dollar, ING said further gains may be contained. “We doubt the dollar needs to rally too much further,” the bank added.
In the coming weeks, investors will be paying attention to central bank comments from the IMF Spring Meetings, where policymakers are expected to discuss implications of higher oil prices and inflation risks.
In the absence of major data releases, currency markets are likely to remain driven by geopolitical headlines and their impact on energy markets and global risk appetite.
