Pound Sterling underperforms peers on renewed Middle East war
- The Pound Sterling underperforms as the failure of US-Iran talks has dampened market sentiment.
- US President Trump announces that the blockade of Iranian ports will begin on April 13 at 10:00 AM ET.
- Traders will likely raise hawkish Fed bets as oil prices recover strongly.
The Pound Sterling (GBP) trades lower against its major currency peers, trading 0.25% lower to near 1.3425 against the US Dollar (USD) during the European trading session on Monday. The British currency declines as the failure of high-stakes talks between the United States (US) and Iran regarding the permanent ceasefire has dampened investors’ risk appetite.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.27% | 0.21% | 0.22% | -0.00% | 0.21% | 0.07% | 0.08% | |
| EUR | -0.27% | -0.08% | -0.04% | -0.27% | -0.08% | -0.19% | -0.13% | |
| GBP | -0.21% | 0.08% | 0.02% | -0.22% | -0.01% | -0.13% | -0.12% | |
| JPY | -0.22% | 0.04% | -0.02% | -0.28% | -0.06% | -0.19% | -0.11% | |
| CAD | 0.00% | 0.27% | 0.22% | 0.28% | 0.25% | 0.10% | 0.10% | |
| AUD | -0.21% | 0.08% | 0.00% | 0.06% | -0.25% | -0.11% | -0.02% | |
| NZD | -0.07% | 0.19% | 0.13% | 0.19% | -0.10% | 0.11% | 0.03% | |
| CHF | -0.08% | 0.13% | 0.12% | 0.11% | -0.10% | 0.02% | -0.03% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
S&P 500 futures have posted significant losses during the European trade, reflecting a risk-off market mood. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% higher to near 99.00.
Over the weekend, US-Iran negotiations failed to get direction as Tehran refused to give up intentions to build nuclear weapons. In response, the US has announced that it will begin blockading vessels from entering and exiting Iranian ports on April 13 at 10:00 AM ET, 14:00 GMT.
Renewed tensions in the Middle East have boosted oil prices, a scenario that typically diminishes the appeal of currencies from economies, such as the United Kingdom (UK), which rely heavily on oil imports to meet their energy needs.
On the domestic front, Tuesday's speech by the Bank of England (BoE) Governor Andrew Bailey will be closely watched for fresh cues about the monetary policy. Investors will also await the UK's monthly Gross Domestic Product (GDP) data for February, to be released on Thursday. The UK GDP is estimated to have risen 0.1% after remaining flat in January. Along with the GDP data, investors will also focus on the Manufacturing and Industrial Production data.
In the US, traders are expected to raise hawkish Federal Reserve (Fed) bets for upcoming policy meetings as reviving oil prices in the wake of US-Iran peace talks failure have de-anchored inflation expectations again.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
