Pound Sterling Falls Slightly, Geopolitical Risks Loom
GBP/USD weakened slightly during the Asian session on Friday (April 10th), but the decline was limited, and the currency remained above 1.3400. Spot prices were in the 1.3420–1.3415 range, not far from the highest level since late February reached earlier this week, and still had the potential to close the week with strong gains as the market awaited new catalysts.
Currently, investors' primary focus is on the release of the US Consumer Price Index (CPI). The data is expected to show inflation rising again in March, in line with the war-fueled surge in crude oil prices. This has made the Federal Reserve more cautious about cutting interest rates in the near future. Expectations of the Fed holding interest rates for longer tend to support the dollar and limit the pound's strength.
The dollar also received support from tensions in the Strait of Hormuz. Iran halted shipping traffic in the strategic waterway in response to Israel's attack on Lebanon, while US President Donald Trump accused Iran of doing a "very poor" job of managing oil flows and warned of the risk of further attacks if the Iran deal fails. This risk of escalation has caused the market to re-price geopolitical premiums and has also restrained GBP/USD.
In the UK, the market is said to have sharply cut bets on a Bank of England interest rate hike and is now pricing in around 30–40 basis points of hikes by the end of the year. However, this differs from the Fed's signal that it is pointing to one rate cut by the end of this year and another in 2027. Therefore, policy divergence could still provide support for the pound and make the market tend to be cautious before pushing GBP/USD down further. (asd)
Source: Newsmaker.id
