Pound Steady Strengthens Amid Geopolitical Risks
The pound sterling strengthened slightly against the US dollar, with GBP/USD posting a modest gain around 1.3580 in Asian trading on Monday (May 4). However, the upside potential is considered limited as the market continues to monitor escalating geopolitical tensions in the Middle East.
Sentiment turned cautious after US President Donald Trump said the US would begin efforts on Monday morning to assist ships stuck in the Strait of Hormuz as a "humanitarian gesture" for neutral countries in the US-Israel war with Iran. An Iranian official warned that US intervention in Hormuz would be considered a violation of the ceasefire.
The risk of escalating tensions has the potential to boost demand for safe-haven assets like the US dollar, thus acting as a drag on GBP/USD. Iran previously said the US had responded to its 14-point plan through Pakistan and was reviewing the response, while Trump said the proposal was unlikely to be accepted.
On the policy front, the Bank of England and the Federal Reserve both kept interest rates on hold last week. Bank of England Governor Andrew Bailey said "more decisive" tightening could be needed if price pressures from the conflict worsen, although he eased concerns about an imminent interest rate hike. The market now awaits the US April jobs data, due Friday, for further clues on the direction of the dollar and the pair's movements. (asd)
Source: Newsmaker.id
