Sterling rose against its major peers on Wednesday afternoon after Donald Trump said the war in Iran would be over in two to three weeks, lifting sentiment toward riskier assets.
The pound was stronger against the dollar (GBPUSD=X), up 0.6% to $1.3311. It was a similar scenario versus the euro (GBPEUR=X), with the British currency trading up 0.15% at €1.1463.
The US dollar index (DX-Y.NYB), which measures the currency against a basket of six major peers, dropped 0.5% to 99.46.
The gains in sterling came as demand for riskier assets improved overnight after Trump said the conflict in Iran would end in “two to three weeks”, while Iran’s president also signalled a willingness to de-escalate.
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“We possess the necessary will to end this conflict, provided that essential conditions are met, especially the guarantees required to prevent repetition of the aggression,” Iranian president Masoud Pezeshkian said, according to Euronews.
Hopes of a de-escalation in the Middle East have reduced demand for the dollar as a safe haven. However, downside pressure on the US currency is expected to remain limited, as higher oil prices could deter Federal Reserve officials from easing monetary policy.
Sterling might start trading sideways into the evening as Trump said he would only consider a ceasefire in Iran when the Strait of Hormuz is reopened in an apparent backtrack.
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The US president posted on Truth Social that Tehran had requested a ceasefire, which he said he would only entertain once the trade route is “open, free and clear”.
He wrote: “Iran’s New Regime President, much less Radicalized and far more intelligent than his predecessors, has just asked the United States of America for a CEASEFIRE!
“We will consider when Hormuz Strait is open, free, and clear. Until then, we are blasting Iran into oblivion or, as they say, back to the Stone Ages!!!”
Read more: LIVE: FTSE and Wall Street rise on hopes of end to Iran war
In equities, the FTSE 100 (^FTSE) was higher on Wednesday afternoon, up 1.3% to trade at 10,313 points at the time of writing. For more details on market movements, check our live coverage here.
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