Forex News: Pound Falls Amid Escalating Middle East Tensions

Pound Falls Amid Escalating Middle East Tensions

(RTTNews) - The British pound weakened against other major currencies in the European session on Tuesday, as the conflict in the Middle East escalates.

Saudi Arabia has hinted at a possible military change, bringing Gulf states closer to direct engagement in the Iranian confrontation.

Uncertainty lingered despite U.S. President Donald Trump's decision to postpone potential strikes on Iran's energy infrastructure for five days.

Huge explosions were heard in Tehran and other cities, as Iran denied it held talks with the U.S. to end the war.

"Iranian people demand complete and remorseful punishment of the aggressors," Iranian Parliament Speaker Mohammad Bagher Ghalibaf wrote in response to Trump's comments, adding that Trump's latest rhetoric "is used to manipulate the financial and oil markets and escape the quagmire in which the U.S. and Israel are trapped."

Iran's foreign ministry said Trump's remarks were "part of efforts to reduce energy prices and buy time" for military plans.

As was largely anticipated, the Bank of England (BoE) maintained interest rates at 3.75% during its March meeting on last Thursday.

Restoring safe shipping through the Strait of Hormuz is essential to tackling rising energy prices, according to BoE Governor Andrew Bailey, who stated that the Middle East crisis will provide a "shock to the economy" and increase inflation in the near future.

In economic news, the UK's S&P Global Composite Purchasing Managers' Index (PMI) drops precipitously to 51.0 from 53.7 in February as a result of a slowdown in activity in both the manufacturing and services sectors, according to flash estimates.

The Manufacturing PMI falls to 51.4 from the previous publication of 51.7, and the Services PMI comes in much lower at 51.2 from the previous reading of 53.9.

In the European trading today, the pound fell to 0.8657 against the euro and 212.27 against the yen, from early highs of 0.8638 and 212.98, respectively. If the pound extends its downtrend, it is likely to find support around 0.87 against the euro and 210.00 against the yen.

Against the U.S. dollar and the Swiss franc, the pound edged down to 1.3386 and 1.0538 from early highs of 1.3446 and 1.0578, respectively. The pound may test support near 1.31 against the greenback and 1.03 against the franc.

Looking ahead, U.S. ADP weekly employment data, Canada manufacturing sales data for February, U.S. Redbook report, U.S. S&P Global PMI data for March, U.S. Richmond Fed manufacturing index for March are slated for release in the New York session.

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