- GBP/USD drifts higher to around 1.3480 in Monday’s early Asian session.
- The prospect of a deal to end the Iran war buoyed risk appetite, supporting the British Pound.
- UK Retail Sales fell by the most in nearly a year in April.
The GBP/USD pair gains traction to near 1.3480 during the early Asian session on Monday. The US Dollar (USD) weakens against the British Pound (GBP) as the United States (US) and Iran signal peace progress. Trading volumes are expected to be light due to a market closure for Memorial Day in the US.
Senior US officials said on Sunday that Washington and Tehran are closing in on a deal that would reopen the Strait of Hormuz, even as US President Donald Trump said he won’t “rush” into an agreement, per Bloomberg. Signs of progress in the US-Iran peace deal could provide some support to the riskier asset, such as the GBP against the USD in the near term.
Nonetheless, the threat of renewed war with Iran “still looms large” as Trump still leaves open the opportunity to launch military strikes. The US President stated that the US blockade in the Strait of Hormuz “will remain in full force and effect until an agreement is reached, certified, and signed.”
Softer UK Retail Sales data, along with an unexpected rise in the Unemployment Rate to 5.0%, has prompted traders to scale back expectations for future Bank of England (BoE) rate hikes by December. This, in turn, might cap the upside for the Cable. BoE policymaker Alan Taylor said that an “extended hold” is likely sufficient, adding that second-round inflationary impacts are less severe than those seen during the 2022 Russia-Ukraine invasion due to a cooling domestic jobs market.
