Sterling rose on Tuesday, supported by a weaker dollar as improving risk sentiment reduced demand for safe-haven currencies.
As of 04:30 ET (08:30 GMT), GBP/USD gained 0.3% to 1.3535, while EUR/USD rose 0.2% to 1.1780, as the dollar remained under pressure following a brief rebound in the previous session.
Track real-time FX moves and central bank signals on InvestingPro - up to 50% off The greenback weakened as markets leaned toward expectations that tensions in the Middle East, particularly around the Strait of Hormuz, may lead to renewed negotiations rather than further escalation.
Oil prices, which had surged on fears of supply disruption, have eased, removing a key pillar of support for the dollar and encouraging flows into risk-sensitive currencies.
Analysts at ING Group said markets were “heavily tilted” toward a benign geopolitical outcome, suggesting much of the positive outlook is already priced in.
They added that while the dollar could recover if tensions flare up again, it would likely take a significant escalation to trigger a sustained rebound.
In Europe, the euro held near recent highs, with investors awaiting comments from Christine Lagarde later in the day. Policymakers are expected to maintain a relatively hawkish tone amid ongoing uncertainty in energy markets.
Sterling was also supported ahead of remarks from Andrew Bailey and other Bank of England officials, though analysts cautioned that expectations for further policy tightening may be overstated.
ING said it does not expect the Bank of England to deliver as many rate hikes as currently priced by markets, which could limit further upside in the pound.
With no major economic data releases due, currency markets are likely to remain driven by geopolitical developments and their impact on energy prices and broader risk appetite.
