Pound Under Siege: Britain's Economic Forecast Wavers Amid Dollar Surge
The pound faced its steepest weekly decline in a month, influenced by concerns over Britain's financial outlook and a strengthening dollar bolstered by robust U.S. growth data. Rising bond yields and fiscal policy uncertainties highlighted economic instability, pressuring British finance minister Rachel Reeves amid faltering growth and rising borrowing costs.
The British pound is closing the week with its most significant decline in a month, as long-term economic concerns mount in the UK. This comes amid a strengthening dollar, following unexpectedly strong U.S. growth data released Thursday.
Earlier, the pound had already been under pressure due to an unexpected increase in public borrowing and sluggish performance in British manufacturing and services. Additionally, a poor government debt auction added to the negative sentiment. The U.S. data indicated faster-than-expected economic expansion in Q2, causing the dollar to climb as investors reconsidered expectations on the Federal Reserve's interest rate cuts.
This economic scenario resulted in a sell-off of major currencies, including the pound, and government bonds, pushing yields higher. By Friday, the pound had inched up slightly but recorded a significant monthly loss. British financial stability issues were underscored by a spike in gilt yields, contributing to a bleak economic outlook as Finance Minister Rachel Reeves prepares for budget announcements.
(With inputs from agencies.)
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