LONDON (Reuters) – The pound fell to its lowest level against the dollar since early July on Thursday, pushed aside by the U.S. currency’s brutal rise following Donald Trump’s U.S. election victory.
These developments are flooding the UK headlines for investors, although they will be keeping an eye on Chancellor of the Exchequer Rachel Reeves’ first Mansion House speech to the city’s leaders, as well as comments from Bank of England Governor Andrew Bailey.
Reeves said beforehand that she wants Britain to build a slew of “mega funds” with up to 80 billion pounds ($102 billion) of new investment firepower, under plans for the biggest shake-up in British pensions in decades.
Pound sterling was last down 0.6% against the dollar at 1.2632, the lowest since July 2, falling through early August lows in mid-morning trading in London.
The move was largely in line with colleagues. The euro fell 0.6% to a one-year low, and the dollar was about 0.5% higher than the Japanese yen and Swiss franc. [FRX/]
“Cable (pound/dollar) is a dollar story at the moment,” said Nick Rees, currency analyst at Monex Europe.
Higher trade tariffs and tighter immigration under the incoming Trump administration are expected to fuel inflation, potentially slowing the Federal Reserve’s longer-term rate-cutting cycle.
These, along with expectations for higher deficit spending and higher economic growth in the near term, are driving a rise in Treasury yields, providing additional support to the dollar.
The benchmark reached 4.483% on Thursday, the highest level since July. [US/]
The pound was stable against the euro at 83.12 pence against the common currency. This has gradually strengthened in recent months, “reflecting the European political risk that should be negative for the euro,” Rees said, pointing to the situation in France and Germany.
The collapse of Germany’s ruling coalition last week forced the country into snap elections likely to take place in February, as the French government tries to push its draft budget for next year despite lacking a majority in parliament.
