Sterling Under Pressure, Markets Turn to the Safe Haven Dollar
The pound sterling weakened against the US dollar, as demand for safe haven assets increased amid geopolitical uncertainty. The GBP/USD pair pared earlier gains and traded around 1.3220 in Asia on Tuesday, as risk-off sentiment boosted the dollar.
Market focus was on US President Donald Trump's statement that he considered the ceasefire proposal with Iran "not good enough" ahead of the deadline for reopening the Strait of Hormuz. Trump emphasized that negotiations were ongoing, but maintained that the Hormuz issue was a crucial sticking point that could determine the direction of escalation.
Market participants were also monitoring Trump's 8:00 PM ET deadline for Hormuz, amid warnings that the US could target Iranian power plants and bridges if demands were not met. Data-wise, the US ISM Services PMI fell to 54.0 in March from 56.1 in February, below the 55.0 forecast, indicating that service sector momentum weakened slightly, though still in expansionary territory.
In the UK, several Bank of England policymakers, including Sarah Breeden and Swati Dhingra, are said to be shifting from a preference for rate cuts to a hold, citing rising energy costs due to the Middle East conflict and the potential for CPI inflation to rise to 3%–3.5% in the coming quarters. Looking ahead, if the Hormuz risk keeps oil prices high, energy inflation pressures could reinforce the “higher for longer” narrative and keep the dollar relatively strong through a combination of safe-haven and interest rate expectations. Meanwhile, gold has the potential to move in both directions, supported by hedging demand as geopolitical risks rise but limited by yields and a strengthening dollar.
5 Key Points:
- GBP/USD weakened to around 1.3220 due to a stronger dollar amid risk-off sentiment.
- Trump called Iran’s ceasefire proposal “not good enough” ahead of the deadline for reopening the Strait of Hormuz.
- Markets are monitoring the 8:00 PM ET deadline and the risk of escalation if US demands are not met.
- US ISM Services data fell to 54.0, indicating slowing momentum, although it remains expansive.
- Bank of England officials are likely to hold interest rates due to rising energy costs and the risk of inflation reaching 3%–3.5% in the next few quarters. (asd)
Source: Newsmaker.id
