Forex News: Pound Slides As Mid East Tensions Rise

Pound Slides As Mid East Tensions Rise

(RTTNews) - The British pound weakened against other major currencies in the European session on Tuesday, as escalating Middle East tensions spurred risk aversion in financial markets.

A prolonged conflict in the Middle East and a persistent fall in oil and gas supplies from the region could cause a "substantial spike" in inflation and a "sharp drop in output" in the euro zone, ECB chief economist Philip Lane has warned in an interview with the Financial Times.

European natural-gas prices surged more than 20 percent today following a production halt at the world's largest liquefied-natural-gas export facility in Qatar.

The jump in oil and gas prices evokes memories of Russia's invasion of Ukraine in 2022, which triggered a global energy crunch and hit Europe particularly hard.

U.S. President Trump said the conflict with Iran will likely last four to five weeks and that the U.S. has the "capability to go far longer than that", raising concerns about a significant widening of hostilities in the region.

In economic releases, U.K. shop price inflation eased in February largely due to the fall in non-food prices, the British Retail Consortium said.

Shop price inflation softened to 1.1 percent in February from 1.5 percent in the previous month. Prices were expected to climb 1.4 percent.

In the European trading today, the pound fell to a 3-month low of 1.3285 against the U.S. dollar, from an early high of 1.3426. The pound may test support near the 1.31 region.

Against the yen and the euro, the pound dropped to 209.46 and 0.8740 from early highs of 211.36 and 0.8740 from early highs of 211.36 and 0.8720, respectively. If the pound extends its downtrend, it is likely to find support around 215.00 against the yen and 0.88 against the euro.

The pound edged down to 1.0429 against the Swiss franc, from an early 5-day high of 1.0458. On the downside, 1.03 is seen as the next support level for the pound.

Looking ahead, U.S. LMI logistics managers index for February, U.S. Redbook report and U.S. RCM/TIPP economic optimism index for March are slated for release in the New York session.

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