The British pound is facing renewed pressure early in the Asian trading session on Monday, with the GBP/USD pair attempting a minor rebound to around 1.3350 after declining 0.37% in the previous session to a low near 1.3342. This follows a rejection from a key resistance area around the 200-day exponential moving average and the 1.3400 level.
The pound's weakness is primarily driven by a resurgent US dollar, fueled by two significant developments within hours of each other. First, former President Trump announced a plan to block and impose a 20% transit fee on vessels using the Strait of Hormuz, effectively turning the world's most critical oil chokepoint into a toll route. Second, a Federal Reserve official, previously known for dovish views, warned that the next policy move could be a rate hike.
Trump's Hormuz "Toll Plan": A Dramatic Policy Reversal
On Monday, former President Trump declared that Washington would reinstate a maritime blockade on Iran and "close" the Strait of Hormuz to Iranian vessels and ships trading with Iran, while other vessels would need to pay a 20% transit fee to a "self-appointed guardian." This announcement comes after recent US strikes on Iran and Iranian attacks on commercial ships shattered last month's ceasefire agreement.
The most striking detail is the reversal in Trump's own stance. As recently as June, the former president insisted that "no one would tolerate" a tolled strait, and there were public Iranian assurances of "no fees, no extra insurance, no charges," with the US State Department at the time deeming such fees "illegal" on international waterways. Crude oil prices have risen in response, tanker insurance is being repriced, and the US dollar is absorbing safe-haven capital flows.
Fed Dove Turns Hawkish: September Rate Hike Probability Surges Past 70%
Coinciding with the geopolitical event, a Federal Reserve Governor long considered one of its most reliable doves delivered a speech in New York. He warned that "the next policy move may need to be a hike," described current policy as at a "crossroads," and explicitly pointed to Tuesday's inflation report as decisive evidence. This official was advocating for rate cuts last year based on the labor market but now acknowledges the risks have reversed, with stable employment and broadening price pressures.
Interest rate futures markets quickly repriced. According to the CME FedWatch Tool, the probability of the Fed holding rates steady in July is 58.3%, with a 41.7% chance of a cumulative 25-basis-point hike. For September, the probability of no change is 24.9%, a 51.2% chance of a cumulative 25-bp hike, and a 23.9% chance of a cumulative 50-bp hike. By December, the probability of no change is just 10%, with a 32.8% chance of a cumulative 25-bp hike and a 57.2% chance of at least a 50-bp hike. This repricing does not even require the Strait of Hormuz to be physically closed; congestion combined with tolls would itself create textbook inflationary effects.
Outlook for the Week
Tuesday's release of US June CPI data will provide a key test for the market. Consensus expects headline CPI to fall 0.1% month-on-month (from +0.5% prior) with the annual rate dropping to 3.8% from 4.2%; core CPI is forecast at 0.2% MoM and 2.9% year-on-year. On paper, this would be disinflationary data, exactly what dollar bears hope to see.
The trap lies in timing: the June survey window closed well before news of a 20% transit fee on one-fifth of the world's seaborne crude oil, making Tuesday's data "a snapshot of a world that no longer exists." The hawkish-speaking Governor explicitly linked the hike debate to the core data—thus, a strong core print would do far more damage than a weak headline print would help. Fed Chair Warsh is scheduled to begin two days of congressional testimony at 14:00 GMT on Tuesday, offering markets a signal on how policymakers wish to interpret the data.
The UK economic calendar is lighter and later in the week: Bank of England Governor speaks at 04:00 Beijing time on Wednesday, followed by UK May GDP data on Thursday (market expects 0.1% MoM growth vs -0.1% prior). US retail sales on Thursday and the preliminary University of Michigan Consumer Sentiment on Friday will also be released—throughout the week, the US dollar holds most of the "high cards."
On the daily chart, GBP/USD is currently trading below its 50-day, 100-day, and 200-day moving averages, with the medium-term averages still pointing downward, indicating the medium-to-long-term downtrend is not fully reversed.
In terms of technical indicators, the MACD is oscillating near the zero line, with the DIFF line (0.0003) slightly crossing above the DEA line (-0.0012) to form a weak golden cross and faint red bars, suggesting bearish momentum is gradually fading. The RSI lines are rising, with RSI1 at 50.05, in neutral territory—neither oversold nor overbought, indicating a balance between bullish and bearish forces.
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