Sterling Faces Historic Drop Amid Currency Shifts Post-Trump Election

The pound has hit its lowest level against the dollar since early July, triggered by the U.S. dollar's surge after Donald Trump's election win. Investors are closely monitoring British finance minister Rachel Reeves' upcoming policy announcements, impacting British pensions, as well as Bank of England's stance.

The British pound experienced a significant decline against the U.S. dollar, reaching its lowest point since early July. This drop coincides with the U.S. currency's robust ascent following Donald Trump's presidential election victory. In the wake of these developments, investors are closely watching finance minister Rachel Reeves' debut Mansion House speech, along with comments from Bank of England governor Andrew Bailey.

Anticipating her speech, Reeves outlined a vision for the UK to establish 'megafunds' aiming to inject up to 80 billion pounds in fresh investment into pensions, marking the most substantial overhaul in decades. The pound slipped 0.6% to 1.2632 against the dollar, its lowest since July, and breached early August levels during mid-morning trading in London.

Meanwhile, the dollar's momentum affected other currencies, with the euro dipping 0.6% to a one-year low and the dollar appreciating around 0.5% against the yen and Swiss franc. Analysts suggest higher U.S. trade tariffs, tighter immigration policies, enhanced deficit spending, and anticipated economic growth are bolstering Treasury yields and strengthening the dollar further.

(With inputs from agencies.)