LONDON (Reuters) – The British pound fell to its lowest level against the dollar since early July on Thursday, pressured by the U.S. currency’s relentless strength following Donald Trump’s election victory.
These developments have overshadowed local UK news for investors, though attention remains on finance minister Rachel Reeves’ first Mansion House speech to City leaders, as well as remarks from Bank of England Governor Andrew Bailey.
In her advance comments, Reeves outlined plans for a significant overhaul of the British pension system, aiming to establish multiple “megafunds” with up to £80 billion ($102 billion) in new investment capacity—the most substantial reform in decades.
Sterling dropped 0.6% against the dollar to 1.2632, marking its lowest point since July 2, and slipping below its early August low during mid-morning London trading. This decline aligned with movements in other currencies, as the euro also fell 0.6% to a one-year low, while the dollar rose 0.5% against the yen and the Swiss franc.
“Cable (GBP/USD) is a dollar story at the moment,” said Nick Rees, currency analyst at Monex Europe.
Higher trade tariffs and stricter immigration policies under the incoming Trump administration are expected to drive inflation, potentially slowing the Federal Reserve’s rate-cutting cycle. These factors, along with expectations of increased deficit spending and short-term economic growth, have pushed U.S. Treasury yields higher, further supporting the dollar.
The benchmark 10-year Treasury yield reached 4.483% on Thursday, its highest level since July. Meanwhile, the pound remained steady against the euro at 83.12 pence. Recent gains in sterling reflect growing European political risks, which could negatively impact the euro.
Rees noted, “The political situation in France and Germany is creating headwinds for the euro.” Germany is facing a snap election in February following the collapse of its ruling coalition, while France is struggling to pass its draft budget for the upcoming year without a parliamentary majority.
