Rising US-Iran military escalation drives safe-haven flows into the Dollar, pressuring the British Pound ahead of key US inflation data.
GBP/USD fell to 1.3390 in early European trading, extending losses as the US Dollar strengthened on heightened Middle East tensions. The US conducted additional airstrikes against Iranian targets over the weekend, following 300 strikes in three nights, fueling demand for the safe-haven currency.
The military escalation has raised concerns over oil supply disruptions, pushing prices higher and reviving inflation fears. Markets now await Tuesday’s US Consumer Price Index data, with June’s headline CPI expected to drop 0.1% month-on-month, while core CPI is forecast to rise 0.3%.
Investors anticipate one more Federal Reserve rate hike this year, with Fed Chair Kevin Warsh’s congressional testimony also in focus. The Dollar’s strength may limit further downside for GBP/USD, though geopolitical risks remain a key driver.