The British Pound rose against both the Euro and the Dollar on Tuesday, boosted by a surge in risk assets following US President Donald Trump's announcement of a ceasefire between Israel and Iran.

However, tensions remained as Israeli Defence Minister Israel Katz stated he had instructed the military to target Tehran, claiming Iran had launched missiles in breach of the truce. Iran denied the accusation, insisting no missiles had been fired toward Israel in recent hours.

In periods of global uncertainty, investors tend to move away from Sterling, considered a risk-sensitive currency, and seek refuge in traditional safe-haven assets like the Swiss Franc, Japanese Yen, and, more recently, the Euro, Reuters reports.

On Tuesday, the Euro dropped 0.40% to 85.23 pence, after reaching 85.74 pence on Monday, its highest point since 23^rd April.

The greenback’s reputation as a safe-haven asset has come under pressure amid concerns about the country’s fiscal policy and possible changes in global reserve currency preferences.

Meanwhile, the Pound gained 0.55% against the Dollar, trading at $1.3601. It had reached $1.36325 last week, marking its highest level since February 2022.

Recent weak economic data and a more dovish stance from the Bank of England have added pressure on the British Pound.

Analysts noted that the BoE’s decision last week to hold interest rates steady, with three members of the Monetary Policy Committee voting to cut rates immediately, signals growing concern about the UK's economic growth prospects and the state of its labour market.

A survey released on Monday showed that while British business activity grew slightly, employers accelerated the pace of job cuts.

“Rate setters view the current policy stance as restrictive and are ready to ease as inflation pressures fade, but we must be prepared for this to take time,” stated Dean Turner, chief eurozone and UK economist at UBS Global Wealth Management's Chief Investment Office.

“We expect the BoE to stick with its quarterly cadence of cuts and deliver 25 bps reductions at its August and November meetings, taking the base rate to 3.75% by year-end.”