Investing.com — Sterling slipped quietly lower on Tuesday as a familiar cocktail of dollar resilience and renewed Middle East anxiety kept the pound on the back foot, with unable to sustain Monday’s tentative recovery.
As of 08:55 ET (12:55 GMT), GBP/USD fell 0.25% to 1.3468, pulling back from an open of 1.3496 and a session high of 1.3497, reversing the modest 0.10% gain posted on Monday.
was barely moved, off just 0.09% at 1.1633, leaving the pound’s softness as a largely dollar-driven story rather than one of broad euro strength.
The dollar’s refusal to weaken, despite global equity markets continuing to price Middle East de-escalation, is drawing increasing attention.
ING’s Chris Turner noted that the greenback’s resilience appears driven by growing conviction that the Federal Reserve is preparing to turn less dovish, at a time when softer activity data is raising questions over how aggressively other central banks can tighten.
Fed Governor Christopher Waller’s speech last Friday, briefly caused markets to price a full 25 basis point Fed hike, triggering bearish flattening of the US yield curve, a clear dollar positive.
ING sees the remaining supported in a 99.00–99.50 range, with Thursday’s PCE inflation release, where Waller estimates headline inflation will have risen to 3.8% year-on-year, carrying the greatest risk of a breakout.
The more immediate dampener on risk appetite came from the Middle East, where hopes for a swift and durable ceasefire agreement frayed on Tuesday.
Iran’s Islamic Revolutionary Guard Corps warned that retaliatory strikes against the U.S. were “legitimate and definite” should Washington violate the ongoing ceasefire, with Tasnim, a news agency closely linked to the IRGC, reporting that Iranian forces had fired upon an American drone and “drove off” a fighter jet.
U.S. Central Command confirmed it had conducted fresh “defensive” strikes in southern Iran targeting missile launch sites and mine-laying boats, while stressing the action did “not indicate ceasefire is over.”
The episode tempered recent optimism that Washington and Tehran were approaching a framework deal to extend the ceasefire and reopen the Strait of Hormuz, which Secretary of State Marco Rubio said could “take a few days,” vowing the strait would reopen “one way or another.”
Crude has surged over 50% since the conflict began, and with U.S. PCE inflation data this week expected to confirm the energy-driven price shock is accelerating, the Bank of England faces a disinflation picture that is growing more complicated by the week.
ING noted that EUR/USD fair value remains anchored around the 1.16/17 area, with no strong case for a breakdown to 1.1500 absent a further hawkish shift from FOMC members or continued disappointment in European data, the latter of which last week’s softer PMI readings have begun to supply.
SOURCE LINK : Sterling today: Pound slips as dollar holds firm amid ceasefire jitters By Investing.com
