Pound's Sharpest Drop: Stir in the Currency Market

The British pound faced its steepest three-day decline in two years, driven by a global bond sell-off that spiked UK gilt yields to their highest in over 16 years. Concerns over Britain's fiscal health, rising inflation, and uncertainty in global economic policies contributed to the currency's downward spiral.

The British pound is experiencing its biggest three-day drop in nearly two years, affected by a worldwide bond sell-off that has severely impacted UK gilts, pushing yields to 16-and-a-half-year highs amid growing concerns about Britain's financial stability.

Sterling has dipped 0.9% to $1.226, hitting its lowest level since November 2023, and is set to complete a third straight daily decline. Against the euro, the pound has dropped 0.6% to a two-month low of 83.93 pence. The sell-off reflects heightened anxiety over rising inflation, dwindling expectations of interest rate cuts, and uncertainties regarding new U.S. policies under President-elect Donald Trump.

The British market has been particularly affected, as steeply climbing bond yields highlight the perilous state of the country's fiscal outlook. Ordinarily, higher gilt yields would bolster the pound, but investor fears regarding the stability of Britain's finances are overriding this trend.

(With inputs from agencies.)