As Thursday’s session progressed the Pound Sterling to Saudi Arabian Riyal (GBP/SAR) exchange rate gave up most of its earlier gains as the Bank of England (BoE) warned that geopolitical risks are a threat to the UK economy.
‘International and geopolitical risks to financial stability in the United Kingdom persist. Despite recent encouraging signs, the risk of a low nominal growth in the euro area persists. There are also risks associated with a further slowdown in China and to some emerging economies as the stance of monetary policy begins to diverge globally. There also remain significant risks in relation to Greece and its financing needs, including in the near term. Any of these risks could trigger abrupt shifts in global risk appetite that in turn might lead to a sudden reappraisal of underlying vulnerabilities in highly indebted economies, or sharp adjustments in financial markets,’ said the BoE’s financial policy committee.
Earlier…
The Pound Sterling to Saudi Arabian Riyal (GBP/SAR) exchange rate strengthened on Thursday after Saudi Arabia and its Gulf Arab allies launched military operations against Shia Houthi rebels in Yemen.
The Pound Sterling to Saudi Arabian Riyal (GBP/SAR) exchange rate climbed to a session high of 5.6220
Risk sentiment in the global currency market deteriorated, as news broke that Saudi fighter jets had launched airstrikes against Houthi rebels advancing on Yemen’s port city of Aden. The military action is a response to an appeal for assistance from Yemen’s government and is the latest bout of fighting in the Middle East, the conflict has raised fears that war in the region is spreading.
‘The government is urging allies to send fighter jets, their navies and ground forces if necessary to stop the advance of the pro-Iranian Houthi militants,’ said Yemen’s foreign minister Riad Yaseen prior to the Houthi attack on Aden.
Saudi Arabia responded and is supplying 100 warplanes and 150,000 soldiers for the operation, Saudi-owned al-Arabiya television reported on Thursday
Archrivals Saudi Arabia and Iran are battling to exert their influence in the region and this latest conflict in Yemen is another extension of that standoff. The Houthi rebels, which have swept across the Yemen in recent months and who have forced the nation’s president, Abdurabuh Mansur Hadi to flee, are backed by Iran.
Hadi’s defeat is a blow to Saudi Arabia, which had vowed to take action to protect its ally. The kingdom, which is the world’s top oil exporter, has accused Iran of fomenting unrest in Yemen.
Middle East Conflicts Spiralling out of Control
As the news broke of Saudi Arabia military intervention, oil prices surged higher as traders and importers of the commodity said that they were becoming increasingly worried that the Saudi attack is a sign that fighting in the Middle East is spreading and spiralling out of control.
The conflict is raising concerns from a wide number of nations, as the Gulf Aden is a strategically vital waterway that leads to the Red Sea and eventually the Suez Canal, which links the Western Mediterranean to the East.
‘The Saudis have taken military action because they have said the Houthis are getting support from the Iranians. This is an indication that the war may gradually spread into a regional conflict,’ said Li Guofu, director of the Centre for Middle East Studies at the China Institute of International Studies.
If the conflict worsens then we can expect riskier assets to weaken and the Saudi Riyal to come under further pressure against the Pound and other peers.
