GBP/USD rises to 1.3380 after bouncing from six-week lows near 1.3300.
Renewed hopes of a US-Iran peace deal have snapped the US Dollar's rally on Monday.
BoE's Breeden has warned against rushing to hike interest rates.
The British Pound (GBP) is trading higher against the US Dollar (USD) on Monday, to pare losses from a four-day sell-off. The pair is trading above 1.3350 at the time of writing, after bouncing from six-week lows at 1.3302 earlier in the day, as rumours of ongoing peace talks between the US and Iran have hit the safe-haven USD.
Washington and Tehran would be negotiating around a recent proposal submitted by Iranian authorities, according to comments by an Iranian Foreign Ministry spokesperson released by Iranian state media. The same source affirms that Iranian and Omani technical teams met in Oman last week to discuss restoring safe passage through the Strait of Hormuz.
Trump: "The clock is ticking" on Iran
This news has eased previous concerns about the resumption of hostilities, which had crushed market sentiment during the Asian session. A drone attack on a nuclear plant in the United Arab Emirates over the weekend put further strain on a fragile ceasefire. US President Donald Trump responded, warning Tehran that “the clock is ticking," after meeting top national security officers to discuss the forward path in the conflict.
The Sterling, on the other hand, has weaknesses of its own as UK political uncertainty grows by the minute. UK Prime Minister Keir Starmer has pledged to remain in charge, but several Labour Party officials have emerged to replace him. Investors’ concerns about a disorderly leadership transition and, above all, candidates' temptations to increase government spending and trigger another fiscal crisis, are likely to keep GBP rallies limited.
In the absence of key macroeconomic releases in the US and UK, Bank of England (BoE) Deputy Governor for Financial Stability, Sarah Breeden, drew some attention earlier on Monday, warning that the bank should not be “trigger happy” with interest rates, in an interview with the Financial Times newspaper.
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