Sterling Holds Near Six-Month High as Hormuz Hopes Boost Sentiment

Sterling traded around 1.36359 against the dollar on Tuesday, holding near the six-month high hit recently. Expectations that tensions in the Strait of Hormuz may ease improved market risk appetite, lending support to the pound. Investors are closely watching upcoming U.S. economic data and remarks from Federal Reserve officials at the Jackson Hole conference to gauge the future policy path.

Easing Middle East tensions were a key factor underpinning sterling during the session. Reports indicated that the U.S. side said relevant parties need more time to finalize an agreement, a signal interpreted by markets as potential progress in U.S.-Iran diplomatic talks, thereby reducing the tail risk of disrupted shipping through the Strait of Hormuz. Boosted by this, risk currencies broadly strengthened, with sterling briefly climbing to a six-month high of 1.3675. However, sentiment remained cautious ahead of key events, limiting further upside in the exchange rate.

Market focus has shifted to dollar-side risk events. Investors await key U.S. economic data, which could provide fresh clues on the Fed's next move. Meanwhile, remarks from Fed officials at the Jackson Hole conference are also under close scrutiny, as any hints on tapering bond purchases or the timing of rate hikes could trigger dollar volatility and steer the next direction for sterling against the dollar. Until clear signals emerge, sterling may continue to consolidate near current highs.