13.06.2025 08:06

The British pound experienced a significant decline against major currencies Friday, driven by investor aversion to risk following Israel's military action against Iran. This aggressive military campaign, dubbed "Operation Rising Lion" by Israeli Prime Minister Benjamin Netanyahu, targeted numerous Iranian sites, including nuclear facilities and military bases, ostensibly to prevent Iran from developing nuclear weapons. Netanyahu framed the operation as a crucial step to safeguard Israel's existence.

Adding fuel to the fire, US President Donald Trump voiced support for Israel's actions, reiterating that Iran must not be allowed to possess nuclear weapons. This joint stance further heightened geopolitical uncertainty, prompting investors to seek the safety of haven assets, most notably the US dollar. Consequently, the US Dollar Index, a gauge of the dollar's strength against six other major currencies, experienced a notable 0.45% increase, climbing near 98.30 after hitting a three-year low of 97.60 just the day before.

The pound's underperformance was widespread, affecting its value against most major currencies, with the notable exception of those from the Antipodes. This risk-off sentiment overshadowed the anticipation of next week's monetary policy announcements by both the Federal Reserve (Fed) and the Bank of England (BoE). While both central banks are expected to maintain current interest rates, the BoE's “gradual and cautious” approach to monetary expansion could face reassessment in light of recently released weak economic data. The GBP/USD pair slumped to near 1.3530 during European trading.

In conclusion, the escalating conflict in the Middle East, coupled with expectations of potential shifts in monetary policy, created a perfect storm for the pound, resulting in considerable losses against other major currencies. Market sentiment, clearly focused on geopolitical risk, significantly impacted the currency markets.