Pound Weakens at the Start of the Week, Hormuz Crisis Lifts Dollar!
The pound sterling weakened further on Monday (April 20), dropping to around US$1.3503. This pressure was primarily driven by the strengthening US dollar, as investors turned to safe-haven assets following the renewed escalation of tensions between the United States and Iran.
Meanwhile, risk-off sentiment intensified after the US Navy seized Iranian-flagged vessels, which Tehran retaliated by firing on the vessels and re-closing the Strait of Hormuz. This surge in tensions pushed oil and gas prices sharply higher, while also reversing market hopes for normalization of energy trade routes.
In the energy market, Brent and WTI futures jumped around 6%, erasing most of Friday's losses. Rising oil prices tend to amplify inflationary pressures, which in turn influence interest rate expectations in the UK.
Market participants added around six basis points to expectations for a Bank of England interest rate hike this year, although only one hike is still fully priced in. Beyond global factors, political uncertainty is also weighing on sterling, as Prime Minister Keir Starmer's appointment of Peter Mandelson as US ambassador is under scrutiny. He is scheduled to make a statement in parliament, followed by further information from officials regarding the vetting process. (asd)
Source: Newsmaker.id
