Both the British Pound (GBP) and the Euro (EUR) began the week trading in narrow ranges against the US Dollar (USD), as renewed geopolitical tensions in the Strait of Hormuz supported the Greenback's safe-haven appeal. The GBP/USD pair hovered around the 1.3350 level during the Asian session, remaining below its 200-day Simple Moving Average, while the EUR/USD pair consolidated below the mid-1.1400s, close to a two-week high reached last Thursday [1][2].
The escalation in tensions stems from Iran's announcement, via its ambassador to China, of plans to introduce new service fees for ships passing through the Strait of Hormuz, a move opposed by the US. This development has kept the geopolitical risk premium elevated, benefiting the USD and acting as a headwind for both GBP/USD and EUR/USD [1][2].
Despite the USD's safe-haven support, market participants trimmed their expectations for further US Federal Reserve (Fed) interest rate hikes following disappointing US employment data. The US Nonfarm Payrolls (NFP) report showed only 57,000 new jobs added in June, compared to the 110,000 expected, and the previous month's figure was revised down from 172,000 to 129,000. The Unemployment Rate edged lower to 4.2% in June [2]. Easing inflation fears, driven by a recent slump in crude oil prices, also contributed to a shift in market expectations from one to two Fed rate increases in 2026 to between zero and one hike [1][2]. This tempered aggressive USD buying and lent some support to GBP/USD and EUR/USD [1][2].
On the UK side, the Pound found some support from Andy Burnham's commitment to strict borrowing rules, though gains were capped by mixed UK PMI data indicating a significant economic slowdown, particularly in the services sector. Traders are now focused on the upcoming UK Construction PMI and the US ISM Services PMI for further direction [1]. For the Euro, softer Eurozone inflation data led investors to reduce bets on additional European Central Bank (ECB) rate hikes, adding to the cautious sentiment [2]. Key Eurozone data releases, including German Factory Orders and Sentix Investor Confidence, are also in focus [2].
Overall, while geopolitical risks have underpinned the USD, mixed economic data and shifting central bank expectations have limited the downside for both GBP/USD and EUR/USD, resulting in subdued trading ranges at the start of the week [1][2].
CONCLUSION
Geopolitical tensions in the Strait of Hormuz have provided safe-haven support to the US Dollar, pressuring both the British Pound and the Euro. However, softer US jobs data and easing inflation fears have curbed aggressive USD gains, leading to range-bound trading. Market participants are now watching upcoming economic releases for further direction.