The British Pound Skids to a 14‑Month Low
On Monday, the pound slipped down to its lowest exchange rate in more than a year, trading at £1.2149 per US dollar. The dip sent market watchers scrambling for explanations.
What’s Driving the Decline?
- Rising Gilt Yields – The 10‑year UK Treasury bonds surged to 4.89%, the highest level since the 2008 financial crisis. Even the 30‑year gilts nudged up to 5.5%, a 27‑year peak.
- Cost of Borrowing Soars – Higher yields mean the government has to pay more to borrow money. Chancellor Rachel Reeves finds her fiscal flexibility shrinking as the budget hawks £142 billion in new borrowing and a £74 billion annual spend‑up.
- Inflation Anxiety – CPI, wage growth and inflation expectations are on the rise, sparking fears of a prolonged high‑rate environment.
Stock Market Impact
The FTSE 100 opened 22 points lower at 8,226, sliding 0.9% from Friday’s close. Investors are nervous whether the pound can recover amid the rising bond yields.
Expert Take‑aways
- Trading Economics notes that higher yields often support a currency, but capital flight and inflation fears weigh the pound down.
- Oliver Faizallah from Charles Stanley says the UK bonds are being hammered harder than those elsewhere because markets suspect sticky inflation will keep rates high for a long time.
What To Watch For
- The budget announcement will judge fiscal stability closely.
- Any policy hints from the Bank of England about future rates.
- Global bond markets – if international investors continue selling, pressure on the pound will build.
Keep track of these moves if you want to steer your investments through this turbulent currency wave.
