Pound Wobbles as Safe-Havens Shine Amid Geopolitical Tensions

The pound fell against the yen, Swiss Franc, and dollar as investors turned to safe-haven assets following Russia's updated nuclear posture. Analysts suggest geopolitical risks were underestimated. Despite potential relief against the euro, inflation data and Bank of England's policies remain critical for the pound's trajectory.

The pound hit multi-week lows against the yen and Swiss Franc as investors fled to safe-haven assets following a nuclear doctrine update from Russia.

Briefly interrupting a decline, the pound dropped against the dollar after President Putin warned the U.S., citing lowered nuclear strike thresholds amid geopolitical unrest.

As geopolitical risks weigh heavily, investors view sterling as a risky asset, preferring currencies perceived as stable and reliable in unstable markets.

The pound fell 0.9% against the yen and 0.4% versus the Swiss Franc and the dollar. Analysts predict potential strengthening versus the euro, barring further geopolitical disruptions.

On Wednesday, markets anticipate inflation data, critical in signaling the Bank of England's next monetary moves. Current expectations foresee a core services inflation slowdown that may not spur a December rate cut, aligning with the BoE's gradual approach as noted by Alan Taylor and Governor Andrew Bailey.

Meanwhile, the euro, affected by differing monetary policies, saw its lowest level since April 2022, with the European Central Bank's future deposit facility rate in focus.

(With inputs from agencies.)