Sterling rises as investors assess renewed tensions in Gulf
GBP/USD was up 0.35% at 1.3613, while EUR/USD added 0.38% to 1.1767
Sterling rose modestly on Friday as investors assessed renewed tensions in the Gulf and mounting political uncertainty in Britain, with the pound supported by cautious positioning despite a broader deterioration in market sentiment.
As of 12:57 GMT, GBP/USD was up 0.35% at 1.3613, while EUR/USD added 0.38% to 1.1767.
Sentiment deteriorated overnight after clashes in the Strait of Hormuz, where the U.S. carried out strikes and Iran attacked U.S. ships, accusing Washington of violating a ceasefire agreement.
Washington said it did not seek escalation, but investors turned cautious after the Wall Street Journal reported the U.S. was preparing to revive its military escort programme in Hormuz, known as “Project Freedom”, potentially as early as this week. Saudi Arabia and Kuwait have meanwhile lifted airspace restrictions.
Markets had previously viewed President Donald Trump’s pause of the programme as pressure on Washington to pursue a diplomatic settlement, making the reported restart a setback for hopes of de-escalation.
ING said expectations for major currency pairs had become “very binary”, with equities likely to play a bigger role in driving the dollar than oil prices.
The brokerage said a collapse in negotiations without further escalation could pull euro/dollar below $1.17, while a final deal could lift it above $1.18.
Investors were also awaiting U.S. April payrolls data later on Friday. ING forecast job growth of 50,000, below the 65,000 consensus estimate, with unemployment seen steady at 4.3%.
The bank said the labour market remained weak beneath the headline figures, with employment gains concentrated in healthcare, social care and hospitality.
Federal Reserve Governor Chris Waller last week described the labour market as weak, and analysts said Gulf developments were likely to matter more for Fed expectations than payroll data.
Sterling also faced domestic pressure after Britain’s ruling Labour Party suffered heavy losses in local council elections.