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Pound Falls Against the Dollar on US-Iran Tensions and Weak UK PMI

January 3, 2020 at 10:52 by Simon Mugo

50 pound notes and some coins on the UK flagThe Sterling pound today fell against the US dollar as tensions between the US and Iran escalated overnight and investors dumped riskier assets such as the pound. The GBP/USD currency pair has given up most of the gains made in December following Boris Johnson‘s landslide election win that saw the pair spike to multi-month highs.

The GBP/USD currency pair today fell from an opening high of 1.3159 in the Asian session to a low of 1.3067 in the mid-London session and was trading near these lows at the time of writing.

The currency pair extended yesterday’s decline amid a cautious market environment driven by existing global risks. The killing of a top Iranian general by the US triggered a sell-off in most riskier assets as Iran vowed to retaliate against the US. Investors are worried that Iran’s response could destabilise the global economy, given that it controls the Strait of Hormuz, which is a crucial waterway for Middle Eastern oil shipments. The release of the disappointing Markit/CIPS UK Construction PMI for December, which came in at 44.4 missing consensus estimate set at 45.9 also contributed to the pair’s fall.

The release of the weak UK net lending report for November by the Bank of England also did not help the cable given the significant drop witnessed. The upbeat UK mortgage approvals data for November also released by the BoE could not stop the pair’s fall.

The cable’s future performance is likely to be affected by geopolitical events as investors wait for Iran’s response.

The GBP/USD currency pair was trading at 1.3077 as at 10:51 GMT having fallen from a high of 1.3159. The GBP/JPY currency pair was trading at 141.28 having dropped from a high of 142.74.

If you have any questions, comments, or opinions regarding the Great Britain Pound, feel free to post them using the commentary form below.

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