The British pound fell for the third day in a row on Thursday, hitting $1.2239—its lowest in over a year. This drop came alongside a 1.1% fall in the FTSE 250 Index and a sharp rise in UK government bond yields to 4.92%. The market turbulence is being fueled by concerns about inflation and renewed threats of tariffs from Donald Trump.
Growing worries about UK finances
Investors are increasingly uneasy about the UK’s fiscal outlook. Rising borrowing costs are adding pressure on Chancellor Rachel Reeves, with the government’s fiscal headroom shrinking to just £9.9 billion. Comparisons to the instability after Liz Truss’ 2022 mini-budget are resurfacing, with the nation’s growing debt burden becoming a key concern.
Capital flight weighs on the pound
Higher interest rates usually boost a currency, but the pound’s drop suggests investors are pulling money out of UK assets. Traders are hedging against further declines, with sentiment toward the pound the most bearish in two years. As inflation worries and market uncertainty persist, the pound’s future looks volatile, leaving traders on edge about what comes next.
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