- GBP/USD attracts some sellers as Hormuz risks act as a tailwind for the safe-haven USD.
- The divergent BoE-Fed policy expectations favor bulls and act as a tailwind for spot prices.
- Traders also seem reluctant and opt to wait for the crucial US consumer inflation figures.
The GBP/USD pair drifts lower during the Asian session on Friday, though it lacks follow-through selling and remains close to its highest level since late February, set earlier this week. Spot prices currently trade around the 1.3420-1.3415 region and seem poised to register strong weekly gains as investors now look to the latest US consumer inflation figures for a fresh impetus.
The crucial US Consumer Price Index (CPI) report is expected to show that inflation likely rose further in March amid the war-driven surge in Crude Oil prices. This could further discourage the US Federal Reserve (Fed) from cutting interest rates for a while. Adding to this, tensions around the Strait of Hormuz offer some support to the US Dollar (USD), which is seen as a key factor exerting some pressure on the GBP/USD pair.
Iran halted shipping traffic through the strategic waterway in response to brutal Israeli attacks on Lebanon. Adding to this, US President Donald Trump accused Iran of doing a very poor job of handling oil through the Strait of Hormuz, and that it was not the agreement they had. Trump also warned of renewed strikes if the Iran deal fails. This suggests that escalation risks remain on the table and supports Crude Oil prices.
Meanwhile, traders have sharply reduced Bank of England (BoE) rate hike bets and are now pricing in roughly 30-40 basis points (bps) of increases by the year-end. This still marks a significant divergence in comparison to the Fed’s signal for one interest rate reduction by the end of this year and another in 2027. This, in turn, favors the GBP/USD bulls and warrants some caution before positioning for any further losses.
