GBP/USD Reverses Gains as Dollar Finds Support from Hormuz Risks

The GBP/USD exchange rate has been trading at 1.3501, up 0.06% from Friday's high. The pair reached a three-week high on Friday after the July payrolls miss in the US, but Monday saw some of that gain reversed as renewed Strait of Hormuz risk supported the dollar.

The Bank of England and Federal Reserve both have interest rates at 3.75%, resulting in zero carry for the GBP/USD pair. This means that the pair trades purely on relative expectations, with neither side having a decisive shift.

However, the July nonfarm payrolls contraction by 23,000 against a consensus near 80,000 and revisions removing a combined 103,000 jobs across two months has changed the dynamics. The dollar dropped sharply, and sterling rose to its highest since July 15 at $1.350.

But Monday saw some of that gain reversed as Hormuz risks supported the dollar. The pair is now testing how much survives Wednesday's US CPI release, which could push hike odds back toward 67%.