Pound Sterling declines against its peers amid Middle East tensions
- The Pound Sterling trades lower against its major peers as Middle East tensions trigger a risk-off mood.
- The US and Israel kill Iran’s top leaders, including Supreme Leader Ayatollah Ali Khamenei.
- BoE’s Pill advises focusing on inflation’s expectations rather than its current situation.
The Pound Sterling underperforms its major currency pairs, except antipodeans, and is down over 0.4% to near 1.3400 against the US Dollar (USD) during the late Asian trading session on Monday. The British currency faces selling pressure as market sentiment turns extremely cautious, following the war between the United States (US), Iran, and Israel.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.42% | 0.46% | 0.42% | 0.14% | 0.56% | 0.65% | 0.00% | |
| EUR | -0.42% | 0.04% | 0.00% | -0.28% | 0.14% | 0.23% | -0.41% | |
| GBP | -0.46% | -0.04% | -0.04% | -0.32% | 0.10% | 0.17% | -0.45% | |
| JPY | -0.42% | 0.00% | 0.04% | -0.27% | 0.14% | 0.23% | -0.41% | |
| CAD | -0.14% | 0.28% | 0.32% | 0.27% | 0.42% | 0.50% | -0.13% | |
| AUD | -0.56% | -0.14% | -0.10% | -0.14% | -0.42% | 0.09% | -0.58% | |
| NZD | -0.65% | -0.23% | -0.17% | -0.23% | -0.50% | -0.09% | -0.64% | |
| CHF | -0.01% | 0.41% | 0.45% | 0.41% | 0.13% | 0.58% | 0.64% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Over the weekend, the US and Israel launched a number of missile and drone attacks against Iran in which they killed their top leaders, including Supreme Leader Ayatollah Ali Khamenei. In response, Tehran vowed to retaliate for Khamenei’s execution, announced Ayatollah Alireza Arafi as interim leader, and attacked Israel and various US military bases in the Middle East.
Meanwhile, dismal market sentiment has improved the US Dollar’s (USD) safe-haven appeal. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is up 0.23% to near 97.85 even after giving back decent early gains.
On the domestic front, Bank of England (BoE) Chief Economist Huw Pill has warned of upside United Kingdom (UK) inflation risks going forward, citing that the “disinflationary trend has been slower than anticipated”, while speaking before the Parliament’s Treasury Committee on Friday. Pill added that the BoE has put too much weight on inflation being near the target rather than looking ahead.
In the US, investors await the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for February, which will be published at 15:00 GMT. The Manufacturing PMI is expected to come in lower at 52.3 from 52.6 in January.
This week, investors will pay close attention to a slew of US employment-linked data, notably the Nonfarm Payrolls (NFP) report for February, which will be released on Friday.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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