- GBP/USD dips to around 1.3530 in early European trading on Friday.
- Risk-off sentiment driven by growing tensions between Israel and Iran weighs on the pound.
- The Fed’s expectations for interest rate cuts may keep pressure on the US dollar, mitigating losses for the GBP/USD pair.
The GBP/USD pair has weakened to about 1.3530 as Friday’s early European sessions progress. The pound (GBP) is struggling against the US dollar (USD) partly due to escalating geopolitical tensions in the Middle East. Investors are looking ahead to the preliminary Michigan Consumer Sentiment Report, which is set for later in the day.
Israeli Defense Minister Israel Katz announced a “first attack on Iran” late Thursday and declared a state of emergency in anticipation of possible retaliation. Prime Minister Benjamin Netanyahu mentioned that the operation would be brief, lasting just a few days.
Meanwhile, Iranian state media have conveyed a strong warning from military officials that the US and Israel will face severe consequences. These new conflicts elevate concerns about geopolitical risks, putting downward pressure on higher-risk currencies.
In the US, the Producer Price Index (PPI) data released Thursday added a fresh perspective on potential interest rate cuts by the Federal Reserve. Such actions could weaken the dollar and potentially provide support for the GBP/USD pair.
The PPI report indicated a 0.2% decline (revised from -0.5%), which was softer than the expected 0.2% increase. However, the core PPI, excluding food and energy, saw a slight month-over-month rise of 0.1%, which was also lower than the anticipated 0.3%.
