Currency Market Update

During the Asian trading hours on Monday, the GBP/USD pair saw a slight uptick, hovering around 1.3580. However, there are indications that the upward potential for major currency pairs may be constrained due to ongoing uncertainties in the Middle East. All eyes will be on the US employment report set to release later this Friday.

Market participants might approach the situation with caution following statements from US President Donald Trump. He mentioned plans to begin operations in the Strait of Hormuz on Monday morning as a “humanitarian measure” to assist countries caught in the US-Israel conflict with Iran. Iranian officials have asserted that any US involvement in Hormuz would violate the ceasefire, emphasizing that the Strait of Hormuz and the Persian Gulf are not arenas for mere words.

Previously, Iran had indicated that the United States, via Pakistan, was considering a response to its 14-point plan. Still, President Trump suggested that acceptance of it was unlikely. Heightened tensions in the Middle East could bolster safe-haven currencies like the US dollar, which may create headwinds for major currency pairs.

Last week, both the Bank of England and the US Federal Reserve decided to keep interest rates steady. Bank of England Governor Andrew Bailey remarked that “strong tightening” might be necessary if inflation pressures stemming from the conflict escalate significantly. While he downplayed immediate concerns regarding rate hikes, he added that the situation would be monitored closely for its impact on the UK economy.