Pound Sterling outperforms its peers as Trump’s peace call underpins risk-on mood
- The Pound Sterling gains against its major currency peers as market sentiment improves on Trump’s truce call.
- US President Trump shows readiness for ending the war with Iran.
- Both the Fed and the BoE are unlikely to cut interest rates in the near term.
The Pound Sterling trades higher against its major currency peers, rising 0.17% to near 1.3200 against the US Dollar (USD), during the European trading session on Tuesday. The British currency outperforms as the market sentiment turns favorable for riskier assets, following United States (US) President Donald Trump’s statement that he is willing to end the war with Iran despite the Strait of Hormuz remaining largely closed.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.21% | -0.08% | 0.11% | -0.32% | 0.00% | 0.10% | |
| EUR | 0.06% | -0.13% | -0.02% | 0.21% | -0.22% | 0.09% | 0.20% | |
| GBP | 0.21% | 0.13% | 0.13% | 0.35% | -0.09% | 0.22% | 0.34% | |
| JPY | 0.08% | 0.02% | -0.13% | 0.20% | -0.23% | 0.08% | 0.21% | |
| CAD | -0.11% | -0.21% | -0.35% | -0.20% | -0.43% | -0.12% | 0.00% | |
| AUD | 0.32% | 0.22% | 0.09% | 0.23% | 0.43% | 0.32% | 0.43% | |
| NZD | -0.00% | -0.09% | -0.22% | -0.08% | 0.12% | -0.32% | 0.11% | |
| CHF | -0.10% | -0.20% | -0.34% | -0.21% | -0.00% | -0.43% | -0.11% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
S&P 500 futures trade sharply higher ahead of the opening, signifying an improvement in investors’ risk appetite.
According to a report from the Wall Street Journal (WSJ), US President Trump is ready to call a peace with Iran, and will pursue the diplomatic way for evacuating the Strait of Hormuz, as Washington doesn’t intend to extend the military mission beyond his timeline of four to six weeks.
Trump’s call for a truce is a significant de-escalation in the Middle East war; however, the closure of the Hormuz will remain a key concern for global markets. The longer the influence of Iran’s military on Hormuz, the higher the oil prices will be, as supply disruption concerns will remain intact.
On the domestic front, traders are confident that the Bank of England (BoE) will not cut interest rates in the near term, as higher energy prices have de-anchored global inflation expectations.
Meanwhile, the US Dollar (USD) trades marginally higher as traders remain confident that the Federal Reserve (Fed) will not cut interest rates anytime soon due to higher energy prices.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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