Sterling's Rollercoaster: Fiscal Concerns Impact Currency Dynamics
Sterling fell against the dollar and euro due to worries over the UK's fiscal stance, yet it achieved a monthly gain against the dollar. A think tank suggested a tax on bank reserves, impacting bank shares. Rising Gilt yields highlight potential risks for the pound, amid ongoing fiscal focus.
Sterling faced a downturn against both the dollar and the euro on Friday, driven by fears regarding Britain's fiscal health. Despite this, the pound marked a monthly ascent against the U.S. currency, which points to a complex economic landscape.
The UK currency recorded a 0.3% dip to $1.3464 and experienced a similar decline against the euro. However, sterling was poised to achieve an approximate 2% rise against the dollar over the month, amid a slight dip against the euro.
In parallel, an advisory institution advised a potential tax strategy on banks' Bank of England reserves, coinciding with declining British bank shares. Concurrently, the yield on the benchmark 10-year Gilt climbed by 3 basis points to 4.73%, underscoring the potential fiscal risks looming for sterling.
(With inputs from agencies.)
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