The Pound US Dollar (GBP/USD) exchange rate weakened at the start of the week, as renewed Middle East tensions supported demand for the safe-haven US Dollar.
Pound to Dollar (GBP/USD): 1.35403 (+0.43%)
Euro to Dollar (EUR/USD): 1.17873 (+0.41%)
Dollar to Japanese Yen (USD/JPY): 158.812 (-0.22%)
DAILY RECAP:
The US Dollar (USD) opened the week on firm footing, underpinned by a fresh bout of safe-haven demand.
Renewed tensions in the Middle East unsettled markets after Iran reversed its decision to keep the Strait of Hormuz open, closing the waterway again over the weekend.
The situation escalated further after US forces seized an Iranian-linked vessel attempting to breach the blockade.
Iran has since vowed retaliation and signalled it will not participate in further negotiations, raising fears of a prolonged conflict.
This uncertainty bolstered demand for the ‘Greenback’, with investors seeking stability amid rising geopolitical risks.
Meanwhile, the Pound (GBP) struggled to find support.
Sterling came under pressure as rising UK bond yields raised concerns about the outlook for government borrowing and the wider economy.
Additional downside came from a deterioration in consumer sentiment, with confidence falling to multi-year lows amid worries over inflation and the labour market.
GBP/USD Forecast: Weak Jobs Data to Sap Sterling Sentiment?
Looking ahead, the UK’s latest labour market data will be closely watched.
Further signs of cooling in wage growth and employment could dampen expectations for Bank of England tightening, weighing on the Pound.
At the same time, developments in the Middle East are likely to remain a key driver of USD demand.
US retail sales data may also influence the ‘Greenback’, with stronger-than-expected figures potentially reinforcing its recent gains.
