Sterling drops as Israel's strikes on Iran boost safe-haven dollar

Yahoo

18 hours ago

LONDON (Reuters) -The pound fell on Friday, in sync with other volatile currencies such as the Australian dollar, after Israel launched a flurry of strikes on Iran, sending investors scurrying into the relative safety of the dollar.
Sterling fell almost 0.7% to a low of $1.35225, mirroring the 0.9% declines in the Aussie and New Zealand dollars. The euro meanwhile rose 0.2% against the pound to 85.23 pence.
Israel's strikes targeted nuclear facilities, missile factories and military commanders, and Iranian media and witnesses reported explosions including at the country's main uranium enrichment facility.
Iran launched about 100 drones towards Israeli territory in retaliation, which Israel is working to intercept, Israeli military spokesman Brigadier General Effie Defrin said.
Iran has long maintained that its nuclear-related activity is for peaceful purposes.
British Prime Minister Keir Starmer said the strikes were concerning and all parties needed to step back and reduce tensions.
"Until the danger of further escalation has passed, safe assets are likely to remain in demand," Commerzbank currency strategist Michael Pfister said.
Investors were already on edge this week on lingering concern about the resilience of a U.S.-China trade truce and about the impact of existing tariffs, even those that have been rolled back from April 2's sky-high levels, on the wider economy.
The pound has faced a raft of weak UK data on manufacturing activity, employment and economic growth this week. In addition, finance minister Rachel Reeves announced her spending review, which analysts said did little to improve the outlook for growth but raised the chances of possible tax hikes later this year.
Traders expect the Bank of England to deliver another quarter-point rate cut in September and another cut at some point by December, which would bring UK interest rates down to around 3.7%, from 4.25% now.