Sterling endured its sharpest three-day decline in almost two years this morning, as investors continued to offload UK government debt and flock to the US dollar.
By early trading, the pound had slipped 0.9 per cent against the dollar to $1.226, briefly touching its lowest level since November 2023. The currency has weakened by 2 per cent over the past three sessions, its biggest drop since February 2023.
Economists attribute sterling’s slide in part to a global shift towards the dollar, propelled by the prospect of fewer interest rate cuts from the Federal Reserve and mounting trade concerns as Donald Trump prepares to enter the White House on 20 January. The dollar index, which tracks the greenback against six peers, rose by 0.15 per cent in early trading.
Minutes from the Fed’s most recent meeting, published last night, hinted that policymakers plan to scale back monetary support gradually this year, giving the dollar further strength. Sterling also lost ground against the euro, dropping by 0.6 per cent to 83.93p, a near two-month low.
Despite sterling’s weakness, the FTSE 100 climbed 0.51 per cent, or 42.15 points, to 8,293.17. However, the more domestically focused FTSE 250 dipped 0.78 per cent, or 156.61 points, to 19,795.63. Across the Atlantic, the S&P 500 and Dow Jones industrial average both closed higher, while Asian markets lost momentum overnight, with China’s CSI 300 slipping 0.25 per cent and Hong Kong’s Hang Seng down 0.2 per cent. The pan-European Stoxx 600 was broadly flat.
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