Pound Sterling Relief Rally Against Euro and Dollar on Iran Ceasefire News
- Written by: Gary Howes
Secretary of War Hegseth and President Trump. Image: United States government work.
The British pound is rising against the euro and dollar after the U.S. and Iran agree to strike a two-week ceasefire.
U.S. President Donald Trump says a two-week ceasefire between the U.S. and Iran will come into effect if shipping is allowed to move through the Strait of Hormuz.
It's reported this morning that two tankers are set to sail through the Strait.
Iranian Foreign Minister Abbas Araghchi says Tehran will agree to the end in fighting "if attacks against Iran are halted".
For markets, this is a best-case outcome as it avoids a significant escalation. Trump had said he would bomb Iran into the stone ages if his 1 AM BST deadline for Iran to yield was not met.
Oil prices are falling and the dollar is dropping against the majority of its peers.
The pound-dollar conversion trades a per cent higher at 1.3430, pound-euro trades higher by a quarter of a per cent at 1.1490.
Another risk that was avoided was a situation where Trump pushed back that deadline on the pretext that there was some progress, ultimately ensuring the status quo of recent weeks continues.
Under such a scenario, markets would have muddled along.
However, with a ceasefire being reached and shipping flowing through the Strait, there's a distinct sigh of relief in global markets.
The pound tends to benefit when the mood music improves, and falling oil and gas prices will surely aid the domestic economy.
There's also a possibility that the market will now row back on bets the Bank of England will respond to rising inflation risks with interest rate hikes.
That's welcome news for borrowers, but for the pound, the risks are murkier: often when that happens, pound sterling can come under pressure.
So that's something we'll look for in the coming days.
For now, the relief rally is in charge, and that's taking the local unit up a notch.
