Sterling Takes a Dive Amid Global Bond Market Turmoil

The pound has fallen to its lowest since late 2023 due to a global bond selloff, raising concerns about UK finances. Rising gilt yields have pressured Finance Minister Rachel Reeves to consider future spending cuts. Despite usually supporting the pound, high yields now reflect investor worries.

The British pound has plummeted to its lowest point since late 2023, under pressure from a global bond selloff that has elevated UK government borrowing costs to a 16-year high. The decline has reignited fears about the stability of Britain's finances.

Global bond yields have surged this week due to concerns over rising inflation, reduced chances of interest rate cuts, and uncertainty about U.S. President-elect Donald Trump's future policies. The UK market has been particularly impacted, with 10-year gilt yields spiking to their highest level since 2008.

Finance Minister Rachel Reeves faces a significant challenge as the turmoil might necessitate spending cuts. Despite traditionally supporting the pound, higher gilt yields are now highlighting investor anxiety over the UK's fiscal health.

(With inputs from agencies.)