LONDON, April 2 (Reuters) – The pound fell sharply on
Thursday after U.S. President Donald Trump vowed more aggressive
strikes on Iran and gave little reassurance about the reopening
of the Strait of Hormuz, sending oil prices surging and
investors flocking to the U.S. dollar.
Sterling was last down 0.74% at $1.3208, just a day
after rising 0.6% on hopes that the war could soon be winding
down. It earlier fell as much as 0.95%.
The drop was largely a function of a jump in the dollar,
which is seen as a safe-haven asset. The index measuring the
greenback against a basket of other major currencies rose 0.59%
.
Britain is also highly exposed to energy imports and
investors remain nervous about the country’s fragile public
finances. Yields on British government bonds jumped on Thursday
as energy prices surged.
“Gilt yields are back in uncomfortable territory for the
government, and for sterling,” said Nick Rees, head of macro
research at Monex Europe.
In a televised address on Wednesday, Trump said military
operations would be intensified in the next two to three weeks
and offered no concrete timeline for ending the conflict.
“We’re going to hit them extremely hard over the next two to
three weeks,” he said. “We’re going to bring them back to the
Stone Ages where they belong.”
Trump said the U.S. did not need the Strait of Hormuz and again
challenged allies who depend on Gulf oil to work towards
reopening it.
Oil prices jumped after Trump’s speech and stock markets and
equity futures tumbled. Brent crude, the global
benchmark, was last up 7.8% at $109.11 a barrel.
“Risk aversion is following the typical playbook that we’ve
seen throughout the conflict,” said Michael Brown, senior
research strategist at Pepperstone.
“Crude rallying, and taking everything but the dollar lower
in turn, with the greenback remaining the only real safe haven.”
Sterling dipped against the euro on Thursday, with the euro
zone currency up 0.18% at 87.27 pence.
The pound fell 1.9% against the dollar in March as the war
raised concerns about an energy shock hitting the economy.
Meanwhile, the euro fell 2.2% against the U.S. currency in a
sign that almost all European economies are expected to slow.
