London
The British pound hit its lowest level against the dollar in six months and its weakest against the euro in four months on Monday as concerns across various asset classes weighed on the currency. The pound had already been under pressure due to the market’s reassessment of the Bank of England’s (BOE) rate outlook.
Last week, the BOE decided to keep interest rates unchanged, marking the first time since December 2021 that rates were not increased. This decision was made in light of signs that economic growth is slowing down. Prior to the meeting, market expectations pointed towards another 25 basis point rate hike in 2023, but those expectations have now diminished to around 40% for a further rate hike this year.
Earlier this year, the pound had gained strength as the market expected the BOE to continue raising rates while the European Central Bank and the Federal Reserve were seen as taking a more dovish approach.
On Monday, the pound briefly fell by as much as 0.25% to $1.2213, its lowest level since March 2023, before steadying to trade flat on the day at $1.2242. It is on track for a monthly loss of 3.4%, the largest since September of the previous year.
Against the euro, the pound touched 87.03 pence briefly, its highest level since May, before settling slightly below that level. Concerns about China Evergrande’s financial woes and a drop in British business activity in September have contributed to the pound’s decline.
