Pound Soars as Diplomatic Resolution Boosts Crude Prices and Eases Inflation Fears
The British Pound (GBP) continued its upward trend on Wednesday, trading around 1.3450 against the US Dollar (USD). The pair gained modest gains for the second straight day, with bulls retaining control above the 100-hour Simple Moving Average (SMA).
The latest optimism over a diplomatic resolution to end the five-month-old war in the Middle East and the reopening of the Strait of Hormuz dragged crude oil prices to a four-week low. This eased inflation fears, which had been driving up expectations of a Federal Reserve rate hike.
As a result, traders trimmed their bets for an imminent Fed rate hike, undermining the safe-haven US Dollar (USD). The British Pound benefited from this development, as it acts as a tailwind for the GBP/USD pair. The US ADP Employment and ISM Services Purchasing Manager Index (PMI) reports are due on Wednesday, which could influence market sentiment.
The US JOLTS Job Openings figure declined to 7.359 million in June, below the market expectation of 7.4 million. This cooling of US-Iran tensions also contributed to the Pound's gains. However, the Greenback may face further challenges due to easing safe-haven demand amid building diplomatic momentum around a potential agreement to reopen the Strait of Hormuz.