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GBP/USD sinks as dollar gains amid Middle East risk aversion
GBP/USD traded around 1.3460 as safe haven demand lifted the dollar, even as softer US inflation and producer prices tempered expectations for near-term Fed hikes.
GBP/USD extended losses for a second straight day, trading around 1.3460 during Friday’s Asian hours as the US dollar drew safe haven support from intensifying geopolitical conflict in the Middle East, according to FXStreet.
Energy supply anxieties added to the risk-off tone, after a Reuters report said Iran has instructed Yemen’s Houthi militia to block the Red Sea oil route if the US strikes Iranian power infrastructure. Tasnim also reported explosions in Bandar Abbas, Qeshm and Ahvaz, with additional blasts heard in Kuwait and Basra.
Cooling US economic data provided a counterweight to the greenback’s momentum, with June consumer inflation rising less than expected and producer prices declining unexpectedly. Initial jobless claims also dropped to a two-month low.
FXStreet reported that markets have effectively ruled out a Fed rate hike this month, though investors remain divided over a potential move in September. In the UK, Bank of England Governor Andrew Bailey flagged concern about renewed US-Iran hostilities but said it has not yet materially changed the UK inflation outlook, while Reuters data showed money markets still fully pricing a BoE hike by the November meeting.
Latest closeGBP/USD 1.348 ▼0.5%