Attacks on ships in the Hormuz Strait have resulted in an increase in oil prices, thereby bolstering demand for the US dollar. The NY Fed survey indicates that households anticipate an increase in inflation. Burnham’s fiscal pledge constrains the potential for intensified political pressure on Sterling. The Pound Sterling retreats against the US Dollar on Tuesday as tensions in the Middle East rise, following reports of attacks on two ships in the Strait of Hormuz. The GBP/USD pair is currently at 1.3373, reflecting a decline of 0.11%. The Greenback remains steady following the attack by the Islamic Revolutionary Guard Corps on ships that attempted to navigate the Omani route, disregarding the IRGC’s repeated warnings. These developments supported oil prices and, in turn, the US Dollar, as elevated energy prices might compel the US Federal Reserve to increase interest rates.
The US Dollar Index, which measures the buck’s performance against six currencies, is up 0.05% at 100.93. Data from the US indicated that the trade deficit expanded in May, influenced by a surge in imports alongside a decrease in exports. The Goods and Services Trade Balance deficit registered at $-77.6 billion, exceeding the $-54.6 billion recorded in April. In addition, the New York Fed Survey of Consumer Expectations revealed that households anticipate increased prices, as one-year inflation expectations climbed from 3.5% in May to 3.7% in June. The data indicates that the Fed may choose to maintain current rates, while simultaneously raising the probability of a potential rate hike. Money markets have elevated the probabilities for a rate increase at the September meeting, with the likelihood currently at 60.42%. For the July 29 meeting, there is a nearly 75% probability that the Fed will maintain the current interest rates. In the UK, the economic docket was devoid of significant updates; however, Sterling has gained from the decline in oil prices, which have thus far maintained a positive correlation with the Greenback, applying downward pressure on the Pound.
Furthermore, the likely next Prime Minister, Andy Burnham, reiterated that he will commit to the fiscal rules, easing fears among traders, who were concerned that further spending could trigger a jump in UK GILTS and weakness in the GBP/USD. On the daily chart, GBP/USD is trading at 1.3375, maintaining a slightly bearish tone as it remains constrained below the most recent reading of the 50/100/200-day simple moving average cluster at 1.3403. The pair is trading between the reclaimed upward support trend line anchored near 1.3159 and the descending resistance trend line at 1.3511, indicating a consolidative phase within a broader corrective setup. The Relative Strength Index (14) at approximately 55 has returned to positive territory, suggesting a stabilisation of momentum, albeit without indicating a definitive bullish shift, as price action remains beneath the stacked moving averages.
On the topside, initial resistance is observed at the triple simple moving average cluster around 1.3403, and a sustained break higher would pave the way toward the descending trend-line barrier near 1.3511. On the downside, the next significant structural floor is the ascending support trend line originating from 1.3159, where buyers are expected to uphold the broader medium-term uptrend; a daily close beneath that level would strengthen the bearish sentiment and reveal potential deeper losses toward the mid-1.31 region.