The Pound to Dollar (GBP/USD) exchange rate edged higher on Thursday as hopes of a de-escalation in Middle East tensions reduced demand for the safe-haven US Dollar.
At the time of writing, GBP/USD was trading around $1.3430, modestly higher on the day.
Pound to Dollar (GBP/USD): 1.34356 (+0.1%)
Euro to Dollar (EUR/USD): 1.16232 (+0.1%)
Dollar to Yen (USD/JPY): 159.9325 (-0.04%)
DAILY RECAP:
The US Dollar (USD) drifted lower through Thursday’s session as investors welcomed fresh signs of progress towards a diplomatic solution in the Middle East.
Risk appetite improved after Israel and Lebanon agreed to implement a US-brokered ceasefire designed to halt hostilities and establish security arrangements in southern Lebanon.
The agreement fuelled hopes that broader regional negotiations could regain momentum, particularly after Iran previously linked progress in talks with Washington to an end to Israeli military operations in Lebanon.
While the improvement in sentiment reduced demand for safe-haven assets, losses for the US Dollar remained relatively limited as investors remained cautious about the durability of the ceasefire agreement.
Many traders were also reluctant to take large positions ahead of Friday’s closely watched US non-farm payrolls report.
Meanwhile, the Pound (GBP) traded in a relatively narrow range against most major currencies.
Sterling lacked any meaningful domestic catalyst as the UK economic calendar remained sparse.
UK gilt yields were broadly stable through the session, offering little additional direction for the currency and leaving GBP movement largely driven by external developments rather than domestic fundamentals.
GBP/USD Forecast: Payrolls and Bailey Speech in Focus
Attention is likely to shift away from geopolitical developments and towards key economic events at the end of the week.
The main focus for US Dollar investors will be the latest non-farm payrolls report. Economists expect the US labour market to remain resilient, with another solid increase in employment during May.
A stronger-than-expected reading could reinforce expectations that the Federal Reserve may keep interest rates elevated for longer, potentially supporting the US Dollar.
At the same time, markets will continue to monitor developments in the Middle East. Any setback to the ceasefire agreement or renewed escalation in regional tensions could revive safe-haven demand for the ‘Greenback’.
For Sterling, investors will closely monitor comments from Bank of England Governor Andrew Bailey.
Recent UK economic releases have softened expectations for near-term policy tightening, and any indication that the Bank remains cautious on future rate rises could weigh on the Pound heading into the weekend.
