Pound Sterling weakens to near 1.3300 as geopolitical risks bolster US Dollar
The GBP/USD pair attracts some sellers to around 1.3310 during the early European session on Wednesday. Escalating conflict in the Middle East triggers a "flight to safety," supporting the US Dollar (USD) against the Pound Sterling (GBP). Traders will take more cues from the US ADP Employment and ISM Services Purchasing Managers Index (PMI) reports, which are due later on Wednesday.
US President Donald Trump said the war was the "last best chance" of addressing the threat posed by Iran's ballistic missiles and nuclear program and that the campaign could last four to five weeks with the "capability to go far longer than that.”
Iran continues retaliatory attacks on Israel and US targets in the Middle East, with strikes reported on the US embassy in Dubai and a port in the city of Fujairah in the United Arab Emirates. Traders retreat from riskier assets due to the US–Israel conflict with Iran, weighing on the Cable.
On the other hand, surging oil and gas prices due to Middle East conflicts have fueled fresh inflation fears, causing traders to scale back bets on further easing by the Bank of England (BoE). This, in turn, might help limit the GBP’s losses. The probability of a BoE rate reduction later this month has also plunged, from about 80% last week to less than 20% now, according to Bloomberg.
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