Sterling steady as US-Iran tensions flare up again

LONDON: The pound held steady on Wednesday as U.S. President Donald Trump said that an interim agreement to end the war with Iran was “over” after Tehran carried out new attacks on U.S. bases in the Gulf.

Brent crude futures jumped after Trump’s comments, made before a NATO summit in Turkey, and were last up 5.61% to $78.36 a barrel.

The reaction in currency markets was relatively muted, with the U.S. dollar index last little changed on the day.

Sterling was largely flat at $1.3351, having hit its highest level since June 17 against the greenback on Tuesday.

Against the euro, the pound was a touch weaker on the day at 85.47 pence. That left sterling just shy of recent 13-month highs against the euro.

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Domestic issues were also in focus, with former Greater Manchester mayor Andy Burnham widely expected to succeed Keir Starmer as prime minister later this month.

“We still don’t know an awful lot about the policies of Burnham, assuming that he is the next Prime Minister,” Jane Foley, head of FX strategy at Rabobank, said.

“And we certainly don’t know who his cabinet picks are going to be,” she added.

Markets are especially wary of what a new government could mean for Britain’s stretched finances and are waiting to see who the next finance minister will be. Online betting platform Polymarket was last indicating a 51% chance of left-leaning former energy minister Ed Miliband taking on the role.

“Who is going to be Chancellor is going to give signals to the market as to whether or not we are going to see a chancellor that will try and tighten those purse strings or not,” Foley said.

“And I think that could really set the tone for sterling through the summer and into the autumn.”