Sterling Slumps Amid Economic Uncertainty and U.S. Election Tension

Sterling hit a two-month low against the dollar as investors focused on central banks' easing paths and the U.S. elections. British public borrowing surpassed forecasts, posing a challenge for Finance Minister Rachel Reeves. Analysts expect tight budgets and potential further rate cuts by the BoE.

Sterling has fallen to a fresh two-month low against the dollar, with investor attention fixed on central banks' monetary easing strategies and the potential outcomes of the U.S. elections. The dollar index remains near a 2-1/2-month high, amid expectations of a judicious approach by the Federal Reserve towards rate cuts.

Public borrowing in Britain exceeded official forecasts for the first half of the tax year, revealing the challenges facing Finance Minister Rachel Reeves ahead of her upcoming budget presentation. Analysts predict tightened budgeting, which could potentially weaken the economy and force the BoE into more aggressive rate cuts than currently anticipated by the markets.

Sterling's recent performance saw it drop by 0.05% to $1.2883, having earlier fallen to its lowest since mid-August. The pound has gained from the Bank of England's prudently hawkish stance, signifying a more gradual cut relative to peers, while UK's growth outpaces that of the eurozone.

(With inputs from agencies.)