Pound Holds Steady Amid Middle East Uncertainty
The British pound remained relatively stable on Monday against both the US dollar and euro as markets waited for growth data due later in the week. The sterling was up less than 0.1% against the dollar at $1.3502, just below its three-and-a-half-week high of $1.35085 reached on Friday.
Against the euro, the pound remained flat at 85.62 pence. Traders are keeping an eye on talks in the Middle East to reopen the Strait of Hormuz and any potential impact on energy prices.
The monthly growth figures due for release on Thursday are expected to show that the economy remained resilient in June, with retail sales unexpectedly strong due to World Cup-related spending and hot weather. Oil prices rose slightly on Monday due to continued uncertainty about the reopening of the strait.
Investors are pricing in one rate hike from the Bank of England by the end of the year, but a strategist believes markets are pricing in too hawkish a rate path for the BoE, which could weigh on sterling if reversed. Francesco Pesole of ING FX stated that 'markets are still pricing in some tightening', and that their view is bearish leaning due to no expected rate hikes.