Foreign exchange rotation amid rising geopolitical tensions: Pound and euro divergence, who is accelerating?

【Crypto】Geopolitical tensions heat up, and the foreign exchange market experiences turbulence again. Recently, tensions in South America and the Middle East have intensified, with risk aversion sentiment clearly rising, providing support for the US dollar. Data shows that the British pound against the dollar has weakened, but against the euro it has risen to a two-and-a-half-month high—there’s an interesting logic behind this.

Analysts point out that the euro is more sensitive to trade disruptions than the British pound. In other words, under geopolitical shocks, the pound tends to resist declines. However, this rotation may only be a temporary phenomenon, so there’s no need to take it too seriously.

Looking ahead to 2026, the domestic political environment in the UK continues to suppress economic growth, which is unfavorable for the long-term trend of the pound. In contrast, fiscal stimulus policies in the Eurozone could become new drivers of growth, providing fundamental support for the euro. Short-term risk aversion, long-term policy divergence—this is the true picture of the foreign exchange market.