Financial markets began the week on a cautious note as investors awaited the US Treasury's announcement of 'economic D-Day' sanctions on Iran, scheduled for Monday at 18:00 GMT by Treasury Secretary Scott Bessent. Bessent stated that the US aims to 'sever every economic lifeline' sustaining Iran and described the upcoming measures as the 'single greatest offensive ever marshalled against an adversary' [1][2][4]. In response, Iran's Supreme National Security Council secretary, Mohsen Rezaei, warned that Iran would halt all oil exports through the Strait of Hormuz and elsewhere in the Persian Gulf if the economic war continues, and threatened that any country participating in the US sanctions would be treated as committing an act of war against Iran [4].
Currency markets reflected this uncertainty, with major pairs trading in tight ranges. The US Dollar Index edged higher to the 99.00 region, benefiting from the cautious market stance after closing the previous week deep in negative territory [1]. The USD was strongest against the Canadian Dollar (+0.51%) and showed modest gains against other majors, while US stock index futures traded marginally lower in the European morning [1]. The British Pound (GBP) held near six-month highs against the USD, trading at 1.3675, supported by better-than-expected UK services and manufacturing data, though retail sales disappointed [2]. Strategists at Scotiabank and UOB maintained a bullish outlook for GBP/USD, with Scotiabank seeing potential for a move toward 1.41 over the year if resistance at 1.3650/60 is breached, and UOB targeting 1.3700 in the near term unless support at 1.3585 fails [2][3].
The Australian Dollar (AUD) also consolidated near its highest level since early June, holding above 0.7150 against the USD. Market participants remained hesitant amid escalating US-Iran tensions, with the geopolitical risk premium supporting the safe-haven USD and capping AUD gains [4]. However, subdued US inflation data and the US Treasury's bond buyback plans, which have dragged yields lower, limited any meaningful USD upside. Traders are now focused on upcoming US macroeconomic releases, including the second estimate of Q2 GDP and the July PCE Price Index on Wednesday, as well as Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday, for further policy cues [1][4].
Analysts highlighted that the fundamental backdrop remains tilted in favor of bullish trends for both GBP and AUD, with any corrective pullbacks expected to be limited and likely bought into [2][3][4]. Market sentiment is cautious but not overtly negative, as participants await clarity on US sanctions and central bank policy direction.
CONCLUSION
Markets are in a holding pattern as investors await the US Treasury's announcement of sweeping new sanctions on Iran, with major currencies consolidating and risk sentiment subdued. While geopolitical tensions and upcoming US economic data keep traders cautious, analysts remain optimistic on the near-term prospects for the British Pound and Australian Dollar. The market's next moves will hinge on the details of the US sanctions and signals from the Federal Reserve later in the week.