Sterling weakened Monday as investors shifted toward the U.S. dollar, triggering a broad market selloff and renewed volatility across global assets.
The pound fell 0.47% to $1.328, reversing recent gains as traders reassessed risk and sought safe-haven currencies amid heightened uncertainty.
At the same time, UK government bond yields surged. Ten-year gilt yields reached 5.079%, their highest level since 2008, reflecting expectations of tighter policy.
Markets are now pricing in up to four Bank of England rate hikes this year, driven by concerns over a potential inflationary shock.
Despite last week’s rally, sterling lost momentum as the dollar strengthened and global equities declined, prompting investors to rebalance portfolios.
Analysts warned that rising yields may no longer support the currency, citing risks to growth and pressure on already stretched public finances.
The euro slipped slightly against the pound, though expectations of aggressive tightening in 2026 mark a sharp shift from earlier forecasts of rate cuts.
Policymakers, including Prime Minister Keir Starmer and BoE Governor Andrew Bailey, are set to meet to assess the economic impact of the unfolding energy shock.
