LONDON: The pound fell slightly on Friday but was still set for its biggest weekly increase in three months after the US-Iran ceasefire raised hopes for an end to a conflict that has sent energy prices soaring and threatened global growth.
Sterling slipped 0.15 percent to USD1.342 but was on track for a weekly increase of 1.7 percent, the biggest such rise since mid-January.
The pound rallied 0.7 percent on Wednesday after US President Donald Trump announced an agreement on a two-week ceasefire that would see Iran reopen the key Strait of Hormuz, through which 20 percent of global oil and liquefied natural gas shipments typically flow.
However, the ceasefire was looking fragile on Friday, a day before negotiations were due to take place in Pakistan. Trump said Iran was doing “a very poor job” of letting oil through the strait and Israel continued to strike Lebanon.
“Financial market moves overnight generally have been relatively modest,” said Lloyds Bank analysts Sam Hill and Nicholas Kennedy in a research note.
“It looks like markets are pinning their hopes on positive developments in negotiations in Pakistan over the weekend.”
The pound fell 1.9 percent against the dollar in March as energy prices shot higher and stock markets tumbled, pushing investors towards the US currency, which is seen as a safe haven in times of stress.
Britain’s economy is also highly reliant on energy imports, adding to the pressure on the pound in March as investors braced for a hit to growth. Yet the dollar index, which tracks the currency against six peers, was on track for its biggest weekly fall since mid-January on Friday as investors sold the greenback to move back into stocks, bonds and other currencies.
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