- GBP/USD stalls after Tuesday’s drop which was caused by a surge in safe-haven demand for the US Dollar
- Iran stoked Middle Eastern tensions with a mass missile strike on Tel Aviv.
- Continued diverging outlook on monetary policy may put a floor under GBP/USD’s losses.
GBP/USD stalls and seesaws between tepid gains and losses in the 1.3280s on Wednesday after falling a whole cent on the previous day, when the US Dollar (USD) strengthened as a result of a rise in safe-haven flows due to an escalation of the conflict in the Middle East.
Despite recent losses, the GBP/USD is in an overall uptrend, which has seen it gain almost 5.0% from the early August lows.
Night skies were set alight on Tuesday evening after Iran fired around 200 missiles, many of which were ballistic at the Israeli capital Tel Aviv, in retaliation for the killing of the Hezbollah leader Hassan Nasrallah.The situation remains tense after Israeli Prime Minister Benjamin Netanyahu vowed Israel would avenge the attack, and that Iran had “made a big mistake”.
The New York Times also reported that Israel is committing more troops to its bloody ground offensive in Lebanon, and with tensions running high, the Dollar is likely to see continued support from investors seeking safety. This, in turn, is likely to cap any gains for GBP/USD.
The pair had been in a steady uptrend since early August because of the divergent outlook for monetary policy in the UK and the US. In the UK, the Bank of England (BoE) decided to leave interest rates unchanged at its policy meeting in September whilst in the US the Federal Reserve (Fed) slashed interest rates by a double-dose 50 bps at its meeting. Lower interest rates are generally negative for a currency – in this case the Dollar – as they reduce capital inflows.
The BoE has been advocating a cautious, “steady-as-she-goes” approach to reducing interest rates amid still-high services sector inflation and relatively robust growth. In the US, conversely fears about a hard-landing and weak labor market briefly caused market-based bets to soar to 60% that the Fed would follow up with another 50 bps cut at their November meeting.
Although these bets have since eased after US data reassured investors about the state of the economy, investors remain tense as they await a key piece of data regarding the labor market, in the form of US NonFarm Payrolls data for September, out on Friday.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends recovery beyond 1.0400 amid Wall Street's turnaround
EUR/USD extends its recovery beyond 1.0400, helped by the better performance of Wall Street and softer-than-anticipated United States PCE inflation. Profit-taking ahead of the winter holidays also takes its toll.
GBP/USD nears 1.2600 on renewed USD weakness
GBP/USD extends its rebound from multi-month lows and approaches 1.2600. The US Dollar stays on the back foot after softer-than-expected PCE inflation data, helping the pair edge higher. Nevertheless, GBP/USD remains on track to end the week in negative territory.
Gold rises above $2,620 as US yields edge lower
Gold extends its daily rebound and trades above $2,620 on Friday. The benchmark 10-year US Treasury bond yield declines toward 4.5% following the PCE inflation data for November, helping XAU/USD stretch higher in the American session.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.