Pound Sterling Slides as Markets Flee to the Dollar

– Written by


Frank Davies

STORY LINK Pound Sterling Slides as Markets Flee to the Dollar

The Pound to US Dollar (GBP/USD) exchange rate remained under sustained pressure on Tuesday, tumbling to its lowest level in three months as the conflict involving Iran continued to dominate investor sentiment.

At the time of writing, GBP/USD was trading around $1.3297, down roughly 0.8% compared with the start of the session.

The US Dollar extended its upward run as heightened geopolitical uncertainty encouraged investors to seek the relative safety of the ‘Greenback’.

President Donald Trump signalled that US involvement in Iran could become protracted, warning that military operations would continue until strategic objectives are achieved. Such rhetoric has added to market unease and reinforced demand for haven assets.

Beyond the flight to safety, the Dollar has also drawn support from the sharp increase in global energy prices. While rising oil and gas costs have weighed heavily on currencies tied to energy imports, the US is viewed as comparatively insulated due to its greater domestic production capacity. This relative energy resilience has amplified the USD’s appeal during the latest bout of volatility.

Although Sterling recorded notable losses against the US Dollar, it was more stable against other major peers following Chancellor Rachel Reeves’s Spring Statement.

The update contained no significant fiscal shifts, but Reeves acknowledged the Office for Budget Responsibility’s latest projections, which point to softer economic growth in 2026.

Even so, the market reaction proved muted. Many analysts suggested that elements of the forecasts, particularly those concerning inflation, may already be outdated in light of the surge in energy costs triggered by the unfolding events in the Middle East.

Short-Term GBP/USD Forecast: Services Data in Spotlight

In the coming sessions, the Pound to US Dollar exchange rate is likely to remain sensitive to headlines surrounding the Iran conflict, with geopolitical developments continuing to steer broader risk appetite.

US investors will also monitor the release of the latest ISM services PMI. Should the index remain close to recent elevated levels, it may reinforce confidence in the resilience of the US economy and provide further backing for the Dollar.

For Sterling, ongoing concerns about rising gas prices could cap upside potential. However, confirmation of solid expansion in the UK’s services sector, if reflected in the final February PMI reading, may offer the Pound some short-term support.

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TAGS: Pound Dollar Forecasts