Sterling Closes at $1.3402 as Oil Falls Amid Iran Contacts
Key Facts
Sterling closed at $1.3402 on November 2, compared with $1.33899 the previous day, according to EL7 daily closing data. The move came as oil prices fell by more than 2% in early trading on Monday, with hopes of progress in diplomatic efforts between the United States and Iran reviving, the Associated Press reported. But the limited move in the pound-dollar pair does not by itself prove that diplomacy caused the British currency to rise. Other currencies also showed a mixed picture for the dollar in early trading. The dollar rose against the yen, while the euro climbed against the U.S. currency, according to the same report.
The dollar rose to 157.83 yen from 157.49 yen in early trading on Monday, the Associated Press said. At the same time, the euro climbed to $1.1186 from $1.1160. These moves show the dollar performing differently against major currencies and do not support describing it as broadly weaker during that period. In Asian equities, the Nikkei 225 fell 0.3% to 63,081.86, giving up its early gains. By contrast, South Korea's Kospi rose 2.2% to 5,859.08, according to the agency's data.
In energy markets, Brent crude fell 2.8% to $110.24 a barrel, while U.S. crude dropped 3.1% to $100.85 in early trading, the Associated Press reported. The agency linked the oil decline to renewed hopes surrounding diplomatic efforts, but that move alone does not determine sterling's direction. The political signals came from Iranian talks in Qatar over a proposal to reopen the Strait of Hormuz within two days. Iranian Foreign Minister Abbas Araghchi said the proposal was conditional on Washington meeting Iranian demands. The proposed deadline puts developments around the strait and energy markets at the center of investors' focus on the course of the contacts.
The proposal, however, was not an announcement of an agreement, and there were no direct talks between Washington and Tehran. The Associated Press quoted Araghchi as saying, "The final outcome depends on the answers the United States provides to Iran's questions." He added that Iran hoped Washington would choose "diplomacy instead of other paths." The Iranian delegation left Qatar after days of discussions, while messages continued to be exchanged with the United States through the mediator, according to an agency report published on Monday. Araghchi said consultations with mediators were still underway to avoid a return to full-scale war.
Sterling's move comes against a British economic backdrop combining growth in activity with price pressures. Real gross domestic product grew 0.7% in the three months to August compared with the three months to May, following growth of 0.5% in the periods ending in July and June, according to the Office for National Statistics. In price data, the Consumer Prices Index rose 3.5% in the 12 months to September, up from 3.1% in August. The office attributed the largest monthly upward contribution to transport, particularly motor fuels. The Bank of England had said the prolonged conflict in the Middle East contributed to further increases in energy prices, noting that consumer price inflation rose to 3.1% in August and could increase in the following quarters.
In Britain, attention is turning to the Bank of England's interest rate decision, due to be announced on November 5, according to the Monetary Policy Committee's schedule. The Office for National Statistics is also due to publish its estimate of September GDP on November 12. On the diplomatic front, a Chinese foreign ministry spokeswoman said Beijing would send a special envoy to Iran, Oman and Saudi Arabia in early to mid-November. Washington's response to Iranian conditions remains central to the proposal concerning the Strait of Hormuz. Until then, the sterling closing data alongside moves in oil and other currencies present a mixed trading-day picture, not evidence that diplomatic breakthrough bets alone moved the pound-dollar pair.