LONDON (Reuters) – The pound fell to its lowest level since early July against the dollar on Thursday, undone by the continued rise in the value of the U.S. currency following Donald Trump’s U.S. election victory.
These events will deluge investors with news from the UK, although they will be closely watching Finance Minister Rachel Reeves’ first Mansion House speech to the city’s leaders, as well as remarks from Bank of England Governor Andrew Bailey.
Reeves has said in advance that she wants Britain to create a slew of “mega funds” with up to 80 billion pounds ($102 billion) of fresh investment muscle, as part of plans for the biggest shake-up to British pensions in decades.
The pound sterling was last down 0.6% against the dollar at 1.2632, the lowest level since July 2, falling to an early August low recorded in the early morning hours in London.
The move was largely in line with peers. The euro fell 0.6% to its lowest level in a year, and the dollar strengthened by about 0.5% against the Japanese yen and the Swiss franc. [FRX/]
“Cable (pound/dollar) is the story of the dollar at the moment,” said Nick Rees, currency analyst at Monex Europe.
Higher trade tariffs and tighter immigration under the fresh Trump administration are expected to fuel inflation, potentially slowing the Federal Reserve’s interest rate cut cycle in the longer term.
This, along with expectations of deeper deficit spending and higher near-term economic growth, are lifting Treasury yields, providing additional support for the dollar.
On Thursday, the benchmark reached 4.483%, the highest level since July. [US/]
The pound remained stable against the euro and settled at 83.12 pence against the common currency. It has gradually strengthened in recent months, “which is a reflection of European political risks, which should be negative for the euro,” Rees said, pointing to the situations in France and Germany.
The collapse of Germany’s ruling coalition last week forced the country into early elections, likely to be held in February, as the French government struggles to push through next year’s draft budget despite lacking a majority in parliament.
