The dollar rose yesterday as investors eyed developments in the Iran war, while the pound fell from earlier highs as markets prepared for new British Prime Minister Andy Burnham.
The dollar index, which measures the greenback against a basket of currencies, climbed 0.17 per cent to 100.91, with the euro down 0.23pc at $1.1413.
“There’s a lot of conflicting news coming from the Middle East, on one hand, it looks like it could be escalating, on the other hand, it looks like there’s another like last ditch effort to try to like get a new ceasefire and that’s why oil came off,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York.
The economic calendar for the week is light, and Federal Reserve officials are in a “blackout period” of public comments ahead of the central bank’s meeting next week.
Recent reports on US inflation and the labor market have caused markets to sharply curb expectations for a rate hike from the Fed next week, pricing in only a 14.4pc chance for an increase, according to CME Fedwatch, down from more than 40pc a week ago. Expectations for a hike at the September meeting are at 65.5pc, however.
A bevy of Fed officials, including Chairman Kevin Warsh, have flagged concerns about inflation pressures in recent weeks while noting the labour market remains stable.
The European Central Bank will hold a policy meeting later this week, with markets pricing in only a 13.1pc chance of a hike, according to LSEG data, with a 77.9pc chance for an increase at its September meeting.
Sterling weakened 0.04pc to $1.3448 after climbing to $1.3481 as Burnham took over from Keir Starmer, becoming Britain’s seventh Prime Minister in a decade as he pledged to reshape the country’s politics and deliver a new economic model.
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