Pound breaks above 1.34 to one-year high as dollar extends decline

Sterling surged to its strongest level in a year as the dollar slumped to a three-week low after US-Iran hostilities escalated and Treasury yields slid.

The pound rose to $1.3431, a one-year high, breaking above 1.34 resistance as the dollar extended its decline for a third session.

The dollar index fell 0.3% to 100.60, its lowest in three weeks, after data showed US existing home sales unexpectedly declined 2.4% month over month in June to 4.09 million, while weekly jobless claims dropped to a six-week low of 215,000, according to government figures.

The euro rose 0.07% to $1.1441, while the yen strengthened as Japan's 10-year government bond yield climbed to a 29-year high of 2.902%, boosting the currency's rate differential. Japan's machine tool orders surged 52.8% year over year in June, the largest increase in nearly 4.5 years, supporting the case for further Bank of Japan rate increases.

The pound's breakout above 1.34 opens the door to further gains, with the next resistance level near 1.35, while the dollar's slide below 101 on the DXY index raises the stakes for the Federal Reserve's July 28-29 meeting, where swaps markets are pricing a 24% chance of a quarter-point rate hike.

Geopolitical Catalyst Drives Cross-Asset Volatility

The US military struck about 90 Iranian targets for a second day Thursday in response to attacks on commercial shipping in the Strait of Hormuz, according to The Times of Israel. Iran retaliated by targeting US bases in Bahrain, Kuwait and Qatar with drones and missiles. President Donald Trump said late Wednesday that Iran still wants a deal "badly" but that he does not know whether it will honor the agreement, CNBC reported.

Crude oil prices rebounded on the escalation, with WTI crude rising 1.1% to near $72.46 a barrel and Brent crude climbing 2.75% to $76.18. The spike in energy costs threatens to reignite inflation concerns, complicating the Fed's policy path as it weighs the cooling labor market against persistent price pressures.

Gold rose 1.43% to settle sharply higher, benefiting from dollar weakness and lower Treasury yields, while silver gained 3.77%. The 10-year US Treasury yield jumped to 4.549% following the geopolitical developments, reflecting fresh concerns about imported inflation.

Foreign institutional investors turned net sellers in Indian equities Thursday, offloading 532.86 crore rupees worth of shares after being net buyers in all trading sessions from July 3 through July 8, according to exchange data. The shift comes as India's first-quarter earnings season begins, with Tata Consultancy Services reporting results Thursday.

This article is for informational purposes only and does not constitute investment advice.