- GBP/USD softens to around 1.3425 in Tuesday’s early Asian session.
- Trump insists Iran talks are underway; Iran denies any negotiations taking place.
- US ISM Manufacturing PMI rose to 55.6 in July, stronger than expected.
The GBP/USD pair loses ground to near 1.3425 during the early Asian session on Tuesday. Uncertainty surrounding US-Iran talks drives traders toward a safe-haven currency such as the US Dollar (USD) against the British Pound (GBP). All eyes will be on the US July jobs data, which is due later on Friday.
US President Donald Trump on Monday claimed talks with Iran are ongoing, saying this is Tehran’s “last chance to sign a good document”. Trump added that he expected negotiations to begin in the next day or two to reopen the Strait of Hormuz and create a pathway for Iran to address the US’s concerns about its nuclear programme.
However, Tehran denied that talks with the US were taking place. Iran’s Foreign Ministry Spokesperson, Esmaeil Baghaei, stated that the country’s current focus was on negotiations with Oman over the Strait of Hormuz.
Furthermore, the upbeat US economic data provide some support to the Greenback and create a headwind for the major pair. Data released by the Institute for Supply Management (ISM) on Monday showed that the US Manufacturing Purchasing Managers’ Index (PMI) rose to 55.6 in July, up from 53.3 in June. This figure came in stronger than the market expectation of 54.0.
Last week, the Bank of England (BoE) voted 6-3 to hold the interest rates steady at 3.75%, with three policymakers favoring a rate hike. BoE Governor Andrew Bailey pushed back against expectations of an imminent tightening cycle, saying the disinflation process remains intact. Markets are now pricing in just one rate hike by the end of the year, while renewed US-Iran hostilities continue to add uncertainty to the economic outlook.
Pound struggles for support as BoE hawkish split meets Bailey’s dovish tone
Analysts at Rabobank highlight that “GBP net shorts bounced higher last week ahead of the BoE policy meeting,” underscoring a build-up in speculative bearish positioning on the Pound. They note that, despite “a more hawkish voting split than the market had expected from the MPC,” Governor Bailey’s “dovish” tone ultimately “suggest[ed] little support for the pound from the BoE,” leaving sentiment towards the currency constrained.
