Sterling's Struggles Amid Fiscal Concerns & Global Risks

Sterling showed signs of recovery against the dollar on Monday as investors took a breather after Friday's selloff fueled by fiscal concerns. The dollar's slight downtrend reflected investor anticipation of speeches from Federal Reserve officials throughout the week, seeking insights into the U.S. rate outlook.

Weighing heavily on the British currency are domestic factors such as vulnerabilities in the labor market and possible further fiscal consolidation in the upcoming autumn budget. This, coupled with broader global risks, adds to the challenges facing finance minister Rachel Reeves ahead of the November budget announcement.

Despite the predominant focus on global factors, analysts argue that UK monetary policy changes are unlikely to be the main drivers for sterling in the near future. The pound's vulnerability to domestic issues continues, partly due to the UK's current account deficit, as highlighted by Jane Foley, senior forex strategist at Rabobank.

(With inputs from agencies.)