Pound Steady as Markets Eye Iran-Oman Deal to Reopen Strait of Hormuz

The British pound has remained relatively stable against both the euro and the dollar as market participants await potential developments on a possible deal between Iran and Oman to reopen the Strait of Hormuz.

According to Francesco Pesole, FX strategist at ING, markets are focused on signs that the latest de-escalation is not intended to cause prolonged disruption in the strait. This has led to hopes for lower risks and implications for inflation and central bank policy.

The Bank of England has kept interest rates on hold, with investors pricing in about 23 basis points of tightening by the end of the year. Pesole believes that these expectations have gone too far and argues that sterling could weaken if the central bank does not deliver the hikes markets expect.