Sterling Strengthens to Over 3-Week High

The British pound rose to $1.350 on Friday, its highest level since July 15, while the dollar weakened sharply as investors reduced expectations of a Federal Reserve rate hike in September following a weaker-than-expected US jobs report. Also, easing oil prices reduced concerns over inflation and the potential impact of higher energy costs on the UK economy. President Donald Trump said negotiations between Iran and Oman over the Strait of Hormuz were “moving along,” although a deal has yet to be finalized as details remain under discussion in Tehran. A reopening of the strategic waterway could support energy flows and potentially pave the way for broader talks to end the conflict. Lower energy prices have reinforced expectations that the Bank of England will maintain a gradual approach to monetary policy. At its latest meeting, the BoE left rates unchanged, while Governor Andrew Bailey said the disinflation process remained on track despite ongoing external uncertainties.

The British pound edged down to around $1.344 on Friday as investors remained cautious over the outcome of Iran-Oman talks and whether they will lead to the restoration of energy flows through the Strait of Hormuz. Although the two countries are reportedly working on an agreement to establish transit routes through the strategic waterway, no deal has yet been announced. Concerns over potential supply disruptions also persisted after Iran published a restrictive draft plan that could limit access for US and Israeli vessels and require compensation from countries it considers hostile. Investors continued to assess the implications for the energy outlook and monetary policy, with oil prices rising over the past two sessions despite remaining lower for the week. In July, the Bank of England left interest rates unchanged, while Governor Bailey said further tightening was not currently necessary, arguing that the disinflation process remained on track despite ongoing external uncertainties.

The British pound held above $1.345 as investors remained cautious over the outcome of Iran-Oman talks and whether they will lead to the restoration of energy flows through the Strait of Hormuz. Iran said it had reached an agreement with Oman on a proposed shipping route through the strategic waterway, raising hopes of improved oil supply and lower energy prices. However, a broader US-Iran agreement remains uncertain, with President Donald Trump saying he would “see what happens” in ongoing negotiations. The prospect of lower energy costs has eased concerns over inflation and slowing economic growth, reinforcing expectations that the Bank of England will maintain a gradual approach to monetary policy. That view was strengthened by last week’s Bank of England meeting, where policymakers left rates unchanged and Governor Andrew Bailey downplayed the need for further tightening, arguing that the disinflation process remains on track despite lingering external uncertainties.