Both the GBP/JPY and EUR/GBP currency pairs are experiencing cautious trading as markets react to escalating geopolitical tensions in the Middle East, specifically concerning the Strait of Hormuz. The GBP/JPY pair is trading nearly flat at around 210.85–210.90 during the early European session, reflecting broader consolidation as investors await further developments regarding the Strait of Hormuz, which has been seized by Iran amid ongoing conflict in the region [1]. Similarly, the EUR/GBP pair is trading lower at 0.8720, down from session highs of 0.8735, as risk aversion persists due to concerns about the war in Iran [2].
A key market-moving factor is the ultimatum issued by US President Donald Trump, who has threatened to destroy Iranian power plants and bridges if Tehran does not reopen the Strait of Hormuz by Tuesday at 8:00 PM Eastern Time. This has been met with a warning from an Iranian foreign ministry spokesperson of reciprocal attacks on US facilities [1][2]. However, Axios has reported that regional mediators are negotiating a 45-day ceasefire, which has somewhat eased risk aversion, though Trump's mixed messages continue to keep traders on edge [2].
From a monetary policy perspective, both the Bank of England (BoE) and the Bank of Japan (BoJ) are unlikely to cut interest rates in the near term, as higher oil prices have increased global inflation expectations [1]. In contrast, European Central Bank (ECB) policymakers have suggested a potential rate hike in response to inflationary pressures, while BoE Governor Andrew Bailey has downplayed the likelihood of near-term monetary tightening [2].
Technical analysis for GBP/JPY indicates a neutral bias with a slight downside tilt, as the pair trades just below the 20-day EMA near 211.50. The price is compressed between an ascending support trend line from 207.26 and a descending resistance line from 213.38, signaling consolidation rather than a clear trend. The 14-day RSI between 40.00 and 60.00 further supports the rangebound outlook. Key resistance is at 213.40, with support at 209.00 and 207.24 [1]. For EUR/GBP, the pair remains near one-month highs, with the Euro showing resilience compared to the Pound over the past month of conflict [2].
Looking ahead, the Eurozone Sentix Investor Confidence index, set for release on Monday, is expected to reflect the impact of the Iran war and the energy shock on investor sentiment. The previous reading was -3.1, and the upcoming data is unlikely to provide significant support for the Euro [2].
CONCLUSION
Geopolitical tensions surrounding the Strait of Hormuz are driving cautious, rangebound trading in both GBP/JPY and EUR/GBP, with market participants closely monitoring developments and central bank responses. While technicals suggest consolidation, the potential for escalation or diplomatic resolution remains a key risk factor. Upcoming economic data, such as the Sentix Investor Confidence index, is unlikely to shift sentiment significantly in the near term.