Currency markets traded in tight ranges on Monday as investors weighed ongoing US-Iran military strikes against diplomatic overtures and looked ahead to critical central bank meetings. The US dollar index hovered around 100.72–100.76, barely changed after a three-day safe-haven rally. The British pound edged higher while the euro remained flat, with traders pricing in a high likelihood of steady rates from both the Federal Reserve and the European Central Bank.
US-Iran hostilities entered their ninth consecutive night following the collapse of a month-old ceasefire. The conflict has centered on control of the Strait of Hormuz, a crucial artery for global oil shipments, with reports of an IRGC strike on a Malta-flagged tanker despite a US military escort. Brent crude briefly surged above $90 per barrel before settling near $88.16. Iran later signaled openness to negotiations based on national interests, calming some market nerves. Nick Rees, head of macro research at Monex Europe, noted that volatility was likely to decrease as markets become accustomed to the risk range.
Sterling rose 0.13% to $1.3470 as Andy Burnham prepared to succeed Keir Starmer as UK Prime Minister. Investors welcomed the anticipated appointment of Home Secretary Shabana Mahmood as Chancellor, viewing her as a fiscally cautious centrist. ING’s Chris Turner cautioned that the UK’s tight fiscal position might force the new cabinet to raise taxes. The euro was little changed at $1.1441 ahead of Thursday’s ECB meeting, where rates are expected to remain at 2.25%. For the Fed’s July 29 meeting, futures showed an 85.6% probability of a rate hold, up from 61.5% a month ago. Cleveland Fed President Beth Hammack warned rates may still need to rise if inflation persists. The dollar slipped 0.17% against the Chinese yuan after China held its lending rate steady for the 14th straight month.
