Published by Global Banking & Finance Review®
Posted on June 24, 2025
2 min readLast updated: January 23, 2026
Add as preferred source on GoogleSterling strengthens as risk assets rally following an Israel-Iran ceasefire, impacting global currencies and economic outlook.
By Stefano Rebaudo
(Reuters) -Sterling climbed against the euro and the dollar on Tuesday, lifted by a rally in risk assets after U.S. President Donald Trump announced a ceasefire between Israel and Iran.
Israeli Defence Minister Israel Katz said on Tuesday he had ordered the military to strike Tehran in response to what he said were missiles fired by Iran in a violation of the truce deal. Iran denied violating it, saying there had been no launch of missiles towards Israel in recent hours.
During times of global uncertainty, investors often retreat from sterling - viewed as a risk-sensitive currency - in favour of traditional safe havens such as the Swiss franc, Japanese yen and, more recently, the euro.
The single European currency fell 0.40% to 85.23 pence. It hit 85.74 pence on Monday, its highest level since April 23.
The safe-haven status of the dollar has been under scrutiny on concerns over U.S. fiscal policy, and potential shifts in global reserve currency preferences.
The pound was up 0.55% versus the greenback at $1.3601. It hit $1.36325 last week, its highest level since February 2022. Recent soft economic data and a more dovish tone from the Bank of England have also pressured the British currency.
Analysts said the BoE's vote last week to keep rates steady - with three dissenters in favour of cutting them immediately - suggests that the Monetary Policy Committee is becoming increasingly concerned with the growth outlook and the performance of Britain's labour market.
British business activity expanded modestly but employers cut jobs more quickly, according to a survey released on Monday.
"Rate setters view the current policy stance as restrictive and are ready to ease as inflation pressures fade, but we must be prepared for this to take time," said Dean Turner, chief euro zone and UK economist at UBS Global Wealth Management's Chief Investment Office.
"We expect the BoE to stick with its quarterly cadence of cuts and deliver 25 bps reductions at its August and November meetings, taking the base rate to 3.75% by year-end."
(Reporting by Stefano Rebaudo; editing by Mark Heinrich)
The pound climbed against the euro and the dollar due to a rally in risk assets following a ceasefire announcement between Israel and Iran.
The Bank of England's recent vote to keep rates steady, with dissenters favoring cuts, indicates growing concerns about the economy and a readiness to ease policy as inflation pressures diminish.
The ceasefire announcement led to a rally in risk assets, which typically boosts currencies like the pound that are viewed as risk-sensitive.
A survey indicated that British business activity expanded modestly, but employers were cutting jobs more quickly, reflecting underlying economic concerns.
Analysts expect the Bank of England to maintain a quarterly cadence of rate cuts, projecting a reduction of 25 basis points at upcoming meetings, bringing the base rate to 3.75% by year-end.
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