Pound-Dollar Pares Weekly Loss on Iran Talk Headlines

The U.S. is reportedly moving a second aircraft carrier into the Persian Gulf to assist with the Iran blockade. Image © Adobe Stock

Dollar eases into the weekend as it's confirmed a second round of U.S.-Iran peace talks are at hand.

It's reported Friday Abbas Araghchi, Iran’s foreign minister, is due in Pakistan later today ahead of a second round of peace talks between the U.S. and Iran.

Talks were expected to have taken place earlier in the week but Iran failed to attend. Subsequent reports point to disagreement between military and civilian leaders in Tehran for the failure to proceed.

That Araghachi is due to attend talks suggests some progress towards a unified Iranian position, rekindling expectations for an eventual reopening of the crucial Strait of Hormuz.

Markets are showing a hint of optimism, with global stock indices trading in the green while oil and the dollar are lower.

"Oil and the US dollar are dipping slightly today, while stock futures and bonds rise on the back of easing geopolitical tensions. The positive shift comes as a top Iran diplomat is set to travel to Pakistan as US takes new step to ease flows of oil and gas," says a note from payments firm Convera following the developments.

Pound-Dollar rises a quarter of a per cent to 1.3497, whittling down the week's loss to 0.15%.

Pressure is bearing down on Iran to return to the negotiating table via a U.S. blockade of Iranian shipping that effectively shuts down the country's oil and natural gas exports, depriving Tehran of its only meaningful source of foreign exchange earnings. It is expected that the blockade will ultimately force Iran to shut down crude production.

Friday's news rounds off a frustrating week of geopolitics amidst a distinct lack of progress towards a peace deal.

What emerged by Thursday is that the culprit was infighting in Tehran; an Axios news report revealed military and civilian leaders were at loggerheads as key unifying decision makers have been eliminated during the course of the war.

"We saw that there is an absolute fracture inside Iran between the negotiators and the military, with neither side having access to the supreme leader, who is not responsive," a source told Axios.

For markets, the longer the deadlock drags on, the higher the risk of negative outcomes. For the dollar, that's supportive.

"The lack of coherence on the Iranian side is a cause of US concern; that the IRGC and the civilian government do not appear to be aligned as regards their strategic aims remains a source of obvious contention," says Jeremy Stretch, Chief International Strategist at CIBC Capital Markets.

The narrative now shifts to the outcome of the next round of talks and Monday's initial foreign exchange market action will reflect progress, or a lack thereof.