LONDON: The British pound edged lower against the dollar on Friday as uncertainty over a possible US-Iran peace deal kept investors cautious, while Bank of England Governor Andrew Bailey signalled there was no urgency to raise interest rates.
Reports said the US and Iran had agreed to extend their ceasefire and lift shipping restrictions through the Strait of Hormuz, but the deal still awaits approval from US President Donald Trump.
“If we get close to a ceasefire, some of these underlying macroeconomic developments start taking focus again,” said Kirstine Kundby-Nielsen, senior FX strategist at Danske Bank.
“The UK economy isn’t in great shape.”
Britain’s reliance on energy imports leaves it more exposed than the US to higher fuel costs. While oil prices have fallen in recent weeks, they remain almost 30 percent higher than before the war.
Sterling was last down 0.2 percent at USD1.3410, near the middle of the USD1.33 to USD1.35 range it has traded in over the past two weeks. It was down 0.1 percent for the week.
Before the conflict, investors had expected the BoE to cut rates at least twice this year as inflation eased towards target. Since late February, concerns that higher energy prices could reignite inflation have pushed markets to price in rate increases instead.
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