GBP today: The US dollar strengthened due to escalating tensions, while Bailey's speech pressured the pound to weaken.

Investing.com - The British pound weakened on Thursday. As of 04:05 a.m. Eastern Time (16:05 Beijing time), the pound-to-US-dollar exchange rate fell by about 0.7% to around $1.3212. The move was driven by a further escalation of the situation in the Middle East that strengthened the dollar, while comments from Andrew Bailey, governor of the Bank of England, on rate expectations also increased downward pressure on the pound.

Real-time coverage of major market developments and analysts’ views - Up to 50% off

This trend stems from a “new round of situation escalation” reversing the positioning that had been based on expectations that the situation would ease. Meanwhile, Bailey said that the market has been “too far ahead” in pricing in a series of rate hikes this year.

As the market moved away from positioning linked to expectations of easing tensions, the shift provided support for the dollar.

In the foreign exchange market, the euro also slipped. After trading above 1.160 earlier, the euro fell back to around the 1.150 level, reflecting a similar shift in geopolitical developments and the impact of rising oil prices, with oil prices returning to above $100 per barrel.

Earlier reports said Bailey stated that the market is “too far ahead” in pricing in a series of rate hikes this year. The comments were made after UK short-term interest rates rose sharply. Last month, the two-year swap rate had risen by more than 100 basis points.

ING said the rise in interest rates has “clearly harmed business and consumer confidence,” and noted that, based on data expected to be released (including surveys of business pricing and wage expectations), expectations of further policy tightening may be scaled back.

In the United States, market attention remains focused on labor market data. Markets broadly expect nonfarm payrolls of 65,000, while the latest ADP data came in at 62,000.

ING’s forecast is for 60,000, while Bloomberg whisper numbers are 40,000. The unemployment rate is expected to remain at 4.4%, and any increase would be seen as producing a “more-than-expected impact.”

Analysts said that although the earlier weakening of the dollar was driven by expectations of easing conditions, for a sustained decline to occur, there needs to be clearer progress on the situation around the Strait of Hormuz, and this still remains uncertain.

Due to the Easter holiday, market liquidity is expected to fall by the end of this week, which could amplify market volatility.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.