GBP/USD Strengthens, US Dollar Weakens Amid Hopes for Iran Peace
The pound sterling strengthened against the US dollar at the start of the week, continuing its rebound from a three-week low reached on Friday. GBP/USD rose for the second consecutive day and moved above the mid-1.3300 area in the Asian session.
The pound's strengthening was primarily driven by broad-based US dollar weakness. The US dollar index retreated from its monthly highs after renewed hopes that the five-month-old US-Iran conflict could be resolved diplomatically.
Market sentiment improved after the United States temporarily halted its attack campaign against Iran on Friday night, following 13 consecutive nights of attacks on Iranian targets. Tehran was also reported to have suspended retaliatory strikes against Washington's allies in the Middle East.
US Ambassador to the UN, Mike Waltz, said that while troops remained on standby, President Donald Trump wanted to create space for negotiations. This situation prompted market participants to begin shedding some of their geopolitical risk premium, thus decreasing demand for the dollar as a safe-haven asset.
In terms of market impact, GBP/USD has the potential to remain supported as long as the US dollar weakens and expectations of a Fed rate hike subside. However, the pound's gains could be restrained as investors await the outcome of the FOMC meeting on Wednesday. If the Fed signals a hawkish tone or Middle East tensions escalate, the US dollar could potentially recover and further pressure GBP/USD. (asd)
Source: Newsmaker.id
