Sterling Sinks Amid Rising U.S. Dollar and Political Risks

Sterling continues its downward trend against a strong U.S. dollar despite high British borrowing costs. The U.S. dollar gained strength following solid data, while British government bond yields spiked. Investors look for future signals from the Bank of England as the UK economy struggles to gain momentum.

Sterling continued its descent against the robust U.S. dollar for the second consecutive day, even as UK borrowing costs reached their highest point in 27 years. The pound witnessed a 1% drop to $1.2350 and also weakened against the euro, despite rising yields on British government bonds.

U.S. economic data bolstered investor confidence that American interest rates will remain elevated, driving up Treasury yields and strengthening the dollar across major global currencies. Meanwhile, British long-term borrowing costs have peaked since 1998, with 30-year gilt yields climbing to 5.33%.

Concerns over the UK's fiscal health mount, with market participants anticipating only modest interest rate cuts by the Bank of England. As Britain's economy slows, the focus shifts to insights from Bank of England Deputy Governor Sarah Breeden on inflation and monetary policy.

(With inputs from agencies.)