Pound Falls to Lowest Level Since May, Here's the Cause!
The British pound weakened on Monday (June 8th) and traded near US$1.33, its lowest level since May 15th, as escalating tensions in the Middle East again weighed on global market sentiment. Concerns over the prolonged conflict in Iran have made investors more cautious about the UK economic outlook, especially after oil prices rose sharply. This situation has added pressure on the pound as the market sees the risk of inflation rising again, while the outlook for economic growth has potentially weakened.
The main pressure came from the surge in Brent oil prices, which rose more than 4% after Iran and Israel launched another missile attack on each other. Although President Donald Trump called on both sides to cease hostilities and return to peace talks, the market still views the geopolitical situation as fragile. Rising oil prices are a major concern as they could push energy costs higher, exacerbate price pressures, and disrupt consumer purchasing power and business activity.
Amid these conditions, market expectations regarding Bank of England policy have also shifted. Market participants are now fully expecting two BOE interest rate hikes this year to address inflation risks. However, this view is not entirely in line with internal central bank sentiment. Dovish MPC member Alan Taylor believes that current interest rates are already at a sufficiently tight level and does not see the need to raise rates further simply because of inflationary pressures stemming from the Iran conflict.
In addition to geopolitical and oil factors, UK employment data also added pressure on the pound. The REC/KPMG report showed that permanent job placements fell by the most in 10 months in May, with companies citing low confidence and rising costs as the main reasons. This condition signals that the UK labor market is beginning to weaken ahead of the next Bank of England (BOE) meeting. Going forward, investors will be closely monitoring the direction of oil prices, developments in the Middle East conflict, and BOE policy signals to determine the pound's next direction. (asd)
Source: Newsmaker.id
