Trump says Iran war "close to over" amid hopes for more negotiations
Investing.com -- EUR/GBP saw upside volatility on Tuesday after a tightening rate differential, but moved lower on Wednesday morning following a drop in European Central Bank pricing.
ING said two factors could drive deeper dovish repricing in the UK compared to the eurozone. The Bank of England was prepared to cut rates before the war started. The UK is also expected to face the largest growth impact from the energy shock among OECD countries, which presents a dovish argument.
Bank of England officials have sounded less hawkish in recent off-meeting comments.
ING maintains a bias toward upside movement for EUR/GBP, expecting the entire BoE tightening to be priced out. The bank views 0.880 as a realistic target for the currency pair.
As of 10:55 AM GMT, the British pound strengthened versus the U.S. dollar, with GBP/USD at 1.3310, up 0.6%. The euro weakened versus the British pound, with EUR/GBP at 0.8717, down 0.2%.
The pound has been volatile lately as war in the Middle East began on February 28, with the latest development being U.S. President Donald Trump saying U.S. military forces will leave Iran in two to three weeks. Trump said his goal of eliminating the country’s nuclear threat has been achieved.
The Bank of England’s Financial Policy Committee warned Wednesday that the conflict in the Middle East has triggered a substantial shock to the global economy, increasing risks to financial stability through higher energy prices and volatile markets.
The conflict between Israel and the United States, and Iran has effectively halted shipping through the Strait of Hormuz and reduced energy production in the Gulf region. Oil prices surged above $100 per barrel, with Brent crude reaching over 60% above pre-conflict levels. European and UK natural gas prices jumped more than 70% higher than pre-conflict levels.
