Sterling Struggles Amid Resurgent Dollar and Fiscal Concerns

The British pound experienced a significant drop, reaching a two-month low and marking its largest weekly decline since January. This fall is largely attributed to the strength of the U.S. dollar, compounded by political instability in France and Japan.

Throughout the week, sterling fell by 1.4% against the dollar, echoing a similar drop from early January when concerns over Britain's long-term financial health caused a noticeable sell-off in both gilts and the currency. The pound also showed slight weakness against the euro, contrasting with the single currency's struggle against the dollar amid France's political turmoil.

According to a recent survey, the UK's employment market remains stagnant, with wage growth plateauing as employers worry about potential tax hikes. Finance Minister Rachel Reeves' anticipated fiscal measures could intensify investor apprehension about the government's financial stability, affecting sterling and gilt yields negatively.

(With inputs from agencies.)