During Monday's Asian trading session, the British pound maintained a firm tone against the US dollar, trading around 1.3650 and extending its winning streak to a fourth consecutive session, remaining near its highest level since February 11 reached last Friday. The greenback remains under pressure overall—cooling expectations for Federal Reserve rate hikes and falling US Treasury yields, driven by the Treasury's expanded buyback program, are jointly weighing on the dollar.
However, escalating US-Iran geopolitical tensions are providing safe-haven buying support for the dollar. Iran's Supreme National Security Council secretary warned that if the economic war persists, Tehran will halt oil exports through the Strait of Hormuz and the entire Persian Gulf, while any nation participating in US sanctions would be considered as declaring war on Iran. Inflation risks stemming from volatile energy prices keep expectations of at least one rate hike before year-end on the table, capping the pound's upside potential.
Dollar Remains Under Pressure; Pound Near February Highs
The pound-to-dollar exchange rate maintained a firm tone during the Asian session, trading near 1.3650 and rising for a fourth consecutive day. The dollar continues to struggle in mounting any meaningful rebound, hovering near three-month lows, which provides upward momentum for the pound. Market participants are persistently scaling back bets on a September Fed rate hike as price pressures show signs of cooling. Last Wednesday, the US Treasury announced it would at least double its long-dated debt buyback scale starting September, triggering a pullback in Treasury yields and further pressuring the dollar.
Geopolitical Risks Provide Floor Support for the Dollar
Nevertheless, the dollar's downside may be constrained by geopolitical risks. US Treasury Secretary Bessent is set to unveil "the toughest ever" sanctions against Iran on Monday. In response, Iran's Supreme National Security Council secretary Rezaei stated that if the economic war persists, Iran will halt all oil exports through the Strait of Hormuz and the entire Persian Gulf, warning that any nation participating in US sanctions would be viewed as declaring war on Iran. This stance keeps the geopolitical risk premium alive, providing support for the safe-haven dollar and limiting the pound's upside.
Inflation Risks and This Week's Focus: PCE Data and Jackson Hole
Inflation risks stemming from volatile energy prices keep expectations of at least one rate hike before year-end on the table, which could restrain aggressive dollar short positioning in the near term. Market attention is now shifting to Wednesday's US PCE price index—the Fed's preferred inflation gauge—and Friday's speech by Fed Chair Warsh at Jackson Hole. Investors will seek further clues on the Fed's policy path from these events, which will determine the dollar's short-term directional trend and provide fresh momentum for the pound-dollar pair.
Summary
The pound-dollar pair has strengthened for a fourth consecutive session, currently trading around 1.3650. The dollar is under pressure from cooling Fed rate hike expectations and falling Treasury yields, but US-Iran geopolitical tensions are offering safe-haven buying support for the greenback, limiting the pound's upside. Iran's threat to halt Gulf oil exports and treat sanction-participating nations as acts of war keeps the geopolitical risk premium intact. Inflation risks from energy price volatility maintain expectations of a rate hike before year-end. Market focus now shifts to this week's PCE data and Jackson Hole speech, with 1.3660 serving as the key short-term resistance level.
As of 10:31 Beijing time on August 24, the pound-dollar pair was quoted at 1.3649/50.
Comments