Pound Weakens to $1.347, Hormuz Risks and UK Data Weigh on Sentiment
The pound sterling weakened to around $1.347 in the latest trading on Tuesday (May 26), as escalating US-Iran tensions rekindled inflation concerns and weighed on the global growth outlook. Rising geopolitical risks have made market participants more defensive, particularly as the issue directly relates to global energy and logistics routes.
Iran reported an explosion in the port city of Bandar Abbas, while the US confirmed it had carried out "self-defense" attacks targeting Iranian missile launchers and vessels it said were attempting to lay sea mines. Meanwhile, US President Donald Trump previously stated that a memorandum of understanding between the two countries was "largely negotiated" and could potentially reopen the crucial Strait of Hormuz shipping lane, adding to market uncertainty.
Domestically, the UK saw the latest economic data show private sector activity contracting in May, accompanied by cooling inflation and a softer labor market. This combination prompted investors to trim expectations for a Bank of England interest rate hike, which in turn reduced the support for the pound.
Market focus now shifts to speeches by Bank of England officials for clues on the next policy direction, as well as political developments in the UK. Investors are also closely monitoring the dynamics surrounding Prime Minister Keir Starmer after the Labour Party suffered defeat in this month's regional elections, as political stability could impact risk perceptions and sentiment toward pound-denominated assets. (asd)
Source: Newsmaker.id
