GBP/USD Slides Sharply as Middle East Conflict Spurs Safe-Haven Demand

GBP/USD Drops Below 1.3400 as Investors Flee Risk on Middle East Escalation

The British Pound (GBP) came under heavy selling pressure on Tuesday, with GBP/USD plunging over 1.2% to trade near 1.3400, as geopolitical risk surged. Global investors are turning away from risk assets, including the pound, amid growing uncertainty in the Middle East.

Trump's Military Stance Against Iran Rattles Global Markets

The sharp sell-off follows former US President Donald Trump's announcement that he is deploying military assets to the Middle East, calling for the “unconditional surrender” of Iranian Supreme Leader Ali Khamenei. His social media statements on Tuesday revived fears of a direct US military involvement, shaking investor sentiment across the board.

With hopes for a quick resolution to the Israel-Iran conflict fading, markets are shifting toward safe-haven assets like the US Dollar, Japanese Yen, and Gold. The pound, seen as a higher-risk asset, has been hit particularly hard.

US Retail Sales Fall Again, Adding Economic Pressure

The US Census Bureau reported a 0.9% drop in Retail Sales for May, marking one of the steepest declines this year. April’s figures were also revised downward. Although not as market-moving as inflation or jobs data, weak Retail Sales signal slowing consumer demand, raising questions about the strength of the US economy.

This comes just before a key central bank week, with the Federal Reserve and Bank of England (BoE) expected to clarify their stances on interest rates. Current market pricing suggests about a 50% chance of a Fed rate cut in September, a notable drop from earlier forecasts.

GBP/USD Outlook Remains Bearish

With the pair now decisively below near-term support zones, the path of least resistance for GBP/USD appears to be to the downside. Unless geopolitical tensions ease or upcoming central bank commentary surprises to the dovish side, traders may continue to favor the US Dollar in the short term.

Internal Linking Suggestions (Tredu.com):

• How Geopolitical Tensions Affect Forex Markets
• GBP/USD: Key Technical Levels to Watch
• What Retail Sales Mean for Central Bank Policy
• USD as a Safe-Haven Currency in Turbulent Times