GBP/USD extends downside to near 1.3400 as US enters Israel-Iran war

FXStreet
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  • GBP/USD trades in negative territory for the second consecutive day near 1.3405 in Monday’s Asian session. 

  • The US Dollar gains traction after the US attacked Iran over the weekend. 

  • Retail Sales fell by 2.7% MoM in May, weighing on the Pound Sterling. 

The GBP/USD pair extends the decline to around 1.3405 during the Asian trading hours on Monday. The fears that Iran would retaliate against US attacks on its nuclear sites boost the safe-haven flows, supporting the US Dollar (USD). Investors await the preliminary reading of the Purchasing Managers Index (PMI) for June from the UK and the US, which are due later on Monday. 

The United States carried out airstrikes on three nuclear sites in Iran early Sunday despite US President Donald Trump’s longtime promises to avoid new foreign conflicts, per Bloomberg. Trump said Iran’s key nuclear enrichment facilities had been “totally obliterated” and warned of “far greater” attacks unless Iran agreed to make peace. Iran has vowed to respond, saying it “reserves all options.” The escalating tension in the Middle East and fears of wider conflict boost the demand for safe-haven assets, which lift the Greenback against the Cable. 

The downbeat UK Retail Sales data prompted traders to raise bets on further interest rate cuts from the Bank of England (BoE), weighing on the Pound Sterling (GBP). UK Retail Sales fell 2.7% MoM in May versus a rise of 1.3% prior (revised from 1.2%), the Office for National Statistics (ONS) reported on Friday. This figure came in below the market consensus of a decline of 0.5%.

The BoE decided to keep rates at 4.25% at its June policy meeting on Thursday, as widely expected. BoE Governor Andrew Bailey said that interest rates remain on a gradual downward path but warned, "The world is highly unpredictable.” Economists polled by Reuters expect BoE policymakers to cut rates by 25 basis points (bps) at the next meeting in August and to reduce another 25 bps in the fourth quarter.

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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