Pound Strengthens Supported by BoE, While Dollar Under Pressure
The pound sterling strengthened against the US dollar on Wednesday (May 6), continuing its gains for the second consecutive day. The GBP/USD pair moved away from its weekly low in the 1.3510–1.3515 range and briefly rose to near 1.3580 during the Asian session, as pressure mounted on the US dollar.
The dollar's weakening occurred as market sentiment improved on hopes for a US-Iran peace deal. US President Donald Trump's statement that "Project Freedom," related to securing shipping lanes in the Strait of Hormuz, would be paused to allow time for the agreement to be finalized, coupled with comments from US defense officials that the ceasefire was still holding, boosted expectations of de-escalation and reduced demand for safe-haven assets like the USD.
These geopolitical developments also triggered a decline in oil prices, which in turn eased inflation concerns. Consequently, the market tended to hold back expectations that the Federal Reserve would need to take a more hawkish stance, causing the dollar to lose support from interest rates once again.
On the other hand, the pound received support from the Bank of England's signal that an interest rate hike could still be an option if inflation remains stubborn. The combination of a weaker dollar and policy support from the UK has kept GBP/USD gaining further traction in the short term.
Next, market attention turns to US employment data, including the ADP report and speeches by several FOMC officials, with the primary focus on Friday's Nonfarm Payrolls (NFP) release. Beyond data, geopolitical headlines continue to have the potential to trigger volatility, so GBP/USD movements will be heavily influenced by the direction of the USD (risk sentiment and Fed expectations) as well as the latest developments in the US-Iran conflict. (asd)
Source: Newsmaker.id
