Middle East Risk And Shipping Routes
Araghchi said the Strait of Hormuz is open, but not for countries at war with Iran. Earlier reports said Iran charged some ships for safe passage through the Strait. In the US, S&P Global said business activity slowed to an 11-month low in March, with the Composite PMI at 51.4 versus 51.9. Services PMI fell to 51.1 from 51.7, while Manufacturing PMI rose to 52.4 from 51.6, above the 51 forecast, and the ADP Employment 4-week average was 10K. In the UK, S&P Global showed the Composite Flash PMI fell to 51 in March from 53.7. Services PMI dropped to 51.2 from 53.9, Manufacturing eased to 51.4 from 51.7, and manufacturing input prices were the highest since the 1992 Sterling crisis. The Pound is the UK’s currency and dates to 886 AD. It is the fourth most traded FX unit, making up 12% of transactions, averaging $630 billion per day in 2022, with GBP/USD at 11%, GBP/JPY at 3%, and EUR/GBP at 2%.Dollar Tailwinds And Rate Expectations
The US Dollar is gaining strength from higher oil prices and rising government bond yields. With WTI crude recently pushing above $81 a barrel and the 10-year US Treasury yield holding firm above 4.25%, the market is betting the Federal Reserve will not cut interest rates this year. This environment makes it challenging for the Pound to gain any ground against the Dollar. In the UK, we are seeing signs of a slowing economy, with business activity dropping to a six-month low in March. At the same time, manufacturing input prices have hit levels not seen since the Sterling crisis of 1992, which we remember well from last year’s market analysis. The latest consumer inflation reading of 3.4% confirms the Bank of England is trapped between slowing growth and high prices. This divergence suggests we should consider strategies that benefit from a falling GBP/USD, such as buying put options. Geopolitical tensions in the Middle East are keeping volatility elevated, making options a useful tool to manage risk. The key level to watch is the support trend line just above 1.3300. A daily close below 1.3300 would be a strong signal to increase bearish positions, with potential targets near the 1.3220 pivot and then 1.3100. We should place stops or reconsider our bearish view if the pair manages to reclaim the 1.3500 level. This shows the upward momentum is not completely gone. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
