The GBP/USD pair is facing new selling pressure during Asian trading on Thursday. It has moved away from last week’s peak of about 1.3345. Following comments made by U.S. President Donald Trump, the pair dropped into the mid-1.3200 range. These statements halted a brief two-day recovery from a low point reached earlier in the week.
In his address, President Trump stated that a decision is expected within a two to three-week timeframe. He also warned of potential damage to Iran’s energy infrastructure if an agreement isn’t achieved. Though he claimed negotiations with Iran are going well, Tehran quickly disputed this. Additionally, reports suggest that the United Arab Emirates (UAE) is advocating for military actions to reopen the Strait of Hormuz, raising concerns about escalating tensions in the Middle East.
This recent turmoil has led to a spike in oil prices, which stirs up inflation worries and raises the likelihood of the U.S. Federal Reserve hiking interest rates. Coupled with a global trend towards risk aversion, this is helping the US dollar (USD) regain some strength after a two-day dip that started the year. This shift is seen as a significant factor placing downward pressure on the GBP/USD pair.
On the other hand, the UK economy appears particularly sensitive to energy price fluctuations linked to the situation with Iran. Moreover, the Bank of England (BoE) has hinted at the possibility of increasing interest rates as early as April due to inflation concerns, adding further risks to the economy. This context is diminishing the British pound (GBP) and aligns with the recent downward trend in the GBP/USD pair observed over the last couple of months.
