Dollar Strengthens Amid Geopolitical Tensions; British Pound Falls After Interest Rate Cut

The dollar gained strength due to rising geopolitical tensions and as a safe haven, while the British pound fell after the Bank of England cut interest rates. Tensions in the Middle East escalated following the assassination of a Hamas leader. Federal Reserve policy shifts and employment data are influencing market movements.

The dollar strengthened on Thursday, benefiting from rising geopolitical tensions that bolstered its appeal as a safe haven currency. Meanwhile, the British pound declined after the Bank of England reduced interest rates from a 16-year high amidst divided opinions among policymakers.

This week's assassination of Hamas leader Ismail Haniyeh in Tehran intensified concerns of a widening conflict in the Middle East, prompting threats of retaliation against Israel and supporting the dollar. "We are looking at the threat of outright conflict breaking out in the Middle East," remarked Karl Schamotta, chief market strategist at Corpay, Toronto.

The dollar also rebounded following a Wednesday selloff triggered by dovish comments from Federal Reserve Chair Jerome Powell. Despite Powell's dovish tone, Fed's recent policy statement seemed more balanced. Traders now anticipate three 25-basis-point rate cuts by year's end, with significant focus on the upcoming U.S. government jobs report. The dollar index last stood at 104.11, up 0.06%, while the pound slipped 0.18% to $1.2833. In contrast, the yen saw a slight dip after a surge post Bank of Japan's rate hike to 0.25%.

(With inputs from agencies.)