GBP/USD could recover if UK inflation revives Bank of England rate hike bets, although geopolitical risk may keep the US Dollar supported.
The Pound US Dollar (GBP/USD) exchange rate softened on Tuesday, as a deteriorating market mood underpinned demand for safe-haven assets.
At the time of writing, GBP/USD was trading at around $1.3529. Down slightly from Tuesday’s opening levels.
DAILY RECAP:
The US Dollar (USD) firmed on Tuesday, extending its recovery through the second half of Monday’s session as a deteriorating market mood continued to underpin demand for the safe-haven currency.
This followed the expiry of the 60-day US-Iran Memorandum of Understanding, which ended without a final peace deal or an extension being agreed, and with the Strait of Hormuz still closed.
This triggered fresh concern over a prolonged disruption to energy supplies, with Brent crude climbing back above $90 per barrel on Tuesday.
Adding to the uncertainty in the Middle East was US President Donald Trump’s threat to bomb US ally Oman if it ‘gets in the way’ of talks with Tehran, as the two Gulf countries have been holding separate negotiations to reopen the Strait of Hormuz.
The Pound (GBP) weakened on Tuesday as it was undermined by the release of the UK’s latest jobs report.
Data released by the Office for National Statistics (ONS) showed that the UK’s unemployment rate held at 4.9% in the three months to June, missing forecasts it would fall to 4.8% as employment growth effectively halved at the end of the second quarter.
Accompanying data also reported a slowdown in real earnings, which proved particularly damaging to the Pound as this was seen as further reducing the chances of the Bank of England (BoE) pursuing an interest rate hike later in the year.
Near-Term GBP/USD Forecast: Uptick in US Service Sector Growth to Lift the ‘Greenback’?
Looking ahead, the next catalyst for movement for the Pound to US Dollar (GBP/USD) exchange rate will be the publication of the UK’s consumer price index on Wednesday morning.
Meanwhile, the publication of the minutes from the Federal Reserve’s July policy meeting will be in the spotlight for USD investors on Wednesday evening.
While new Fed Chair Kevin Warsh has sought to limit the guidance provided by the bank, investors are still likely to comb through the minutes for any clues about how policymakers may shape monetary policy in the coming months.
Our currency coverage draws on live market data, official economic releases and published bank research.
