The Pound US Dollar (GBP/USD) exchange rate edged lower on Tuesday, as persistent Middle East tensions supported safe-haven demand for the US Dollar.
Pound to Dollar (GBP/USD): 1.34815 (-0.37%)
Euro to Dollar (EUR/USD): 1.17263 (-0.5%)
Dollar to Japanese Yen (USD/JPY): 159.5755 (+0.46%)
DAILY RECAP:
The US Dollar (USD) traded with modest support through Tuesday’s session, underpinned by cautious market sentiment.
Ongoing tensions between the US and Iran continued to unsettle investors, particularly as the current ceasefire appeared increasingly fragile.
Recent disruptions in the Strait of Hormuz, including vessel seizures and renewed restrictions, have raised concerns about the risk of further escalation.
Uncertainty also surrounds the next round of peace talks, with reports suggesting Iran has yet to send a delegation, adding to doubts over the diplomatic process.
This backdrop helped sustain demand for the ‘Greenback’ as a safe-haven currency.
Meanwhile, the Pound (GBP) struggled to find support following the UK’s latest labour market data.
Although headline unemployment unexpectedly declined, underlying indicators pointed to weakening conditions.
Wage growth slowed to its weakest pace in several years, payrolls continued to fall, and job vacancies declined to multi-year lows.
Economists noted that the drop in unemployment was partly driven by rising economic inactivity rather than stronger hiring, reinforcing concerns over the health of the labour market.
This prompted markets to scale back expectations for Bank of England rate hikes, weighing on Sterling.
GBP/USD Exchange Rate Forecast: Sticking Inflation to Lift Sterling?
Looking ahead, the UK’s latest inflation figures will be the primary focus for GBP investors.
A stronger-than-expected CPI reading could revive expectations for further Bank of England tightening and support the Pound.
Meanwhile, developments in the Middle East are likely to continue guiding US Dollar demand.
Sustained tensions could underpin the ‘Greenback’, while any signs of progress in peace negotiations may weigh on the currency by improving risk appetite.
