Sterling Holds Gains as Dollar Rally Persists

The Expanding Shadow of the Dollar

In the currency markets, GBP/USD edged up by 0.20% to 1.3375 at 13.56, while remaining volatile within 1.3342‑1.3381. The dollar’s dominance continues, bolstered by the re‑implementation of the Strait of Hormuz blockade.

Sterling’s Warm Surge

Sterling’s climb is driven more by broad dollar dynamics than domestic UK catalysts. During the session, UK political and economic data played a minimal role, with the DXY index potentially nearing 102.0.

Oil and Energy: Dollar’s Levers

■Brent crude rose to $84 per barrel.

■As of July 3, U.S. crude oil stocks stood at 730.8 million barrels, the lowest since 1984.

■If energy prices climb further, EUR/USD could drift toward 1.10.

■A surge to €55‑60 per megawatt hour for Dutch TTF gas would amplify risk.

ECB and Fed Policy Lines

■Markets price a 50% chance of a rate hike at the July FOMC; 43 basis points of tightening are priced through year‑end.

■The ECB is priced at roughly 46 basis points of tightening, with a 15 basis‑point narrowing in the two‑year swap spread.

■Fed Chair Christopher Waller warned that persistent core inflation may necessitate further hikes.

Forward Outlooks and Risks

■If the USD remains negative, the DXY could edge toward 102.0 amid falling Gulf tensions.

■A jump in energy prices to $90‑100 per barrel could trigger a 1.10 dip in EUR/USD.

■ING’s baseline scenario projects a negative USD trajectory through 2026.

The dollar’s continued pressure will be shaped by geopolitical tensions and energy price volatility. In this environment, GBP and EUR will likely mirror the dollar’s trajectory, but sudden spikes in energy costs or a renewed Hormuz blockade could trigger unexpected pivot points in these pairs.