Sterling Slides as Dollar Holds Firm Amid U.S.-Iran Tensions

The British pound came under pressure Tuesday, trading near $1.3234 against the U.S. dollar as geopolitical uncertainty and strong American economic data kept the greenback well-supported. Cable dipped to an intraday low of $1.3211, extending a broader pullback from recent highs, with the pair's 52-week low sitting at $1.2721.

Investor caution ahead of a White House deadline linked to the U.S.-Iran standoff drove demand for the dollar as a safe-haven currency. Should diplomatic efforts fail to produce a ceasefire agreement, the potential for U.S. and Israeli military strikes on Iranian civilian infrastructure raises the prospect of broader conflict across the Gulf region — a scenario that could further boost dollar demand.

Rising energy prices are playing a central role in this dynamic. ING strategist Chris Turner noted that any further escalation driving oil and gas prices higher would be "unambiguously dollar-positive," reinforcing the currency's upward momentum. A stronger labor market reading from Friday's March jobs report added to that sentiment, with Federal Reserve rate expectations remaining relatively stable compared to peers pricing in two to three hikes.

Markets are now focused on Wednesday's release of the March FOMC meeting minutes and Friday's U.S. CPI data, where headline inflation is forecast to climb to 3.4% year-on-year from 2.4%. Remarks from New York Fed President John Williams will also draw attention for any policy signals. ING sees the dollar index holding firm within a 100–100.50 range.

The euro also remained on the back foot, with EUR/USD hovering around $1.1544 and ECB rate hike expectations for April below 50%. Across Asia-Pacific, the Reserve Bank of New Zealand is widely expected to leave rates unchanged at 2.25%, and with holiday-thinned liquidity later this week, volatility tied to geopolitical headlines could be amplified across major currency pairs.