Sterling dips as stock rout boosts dollar, outweighs rate rise boost

The pound fell against the dollar ​on Friday, as a stock ​market selloff hit currencies ‌more geared ​towards global growth, while holding broadly steady against the euro around a 19-month high. "The market impact of ‌yesterday's BoE policy update was overshadowed by the deepening selloff for AI-related investments," said Lee Hardman, senior currency analyst at MUFG.

The major domestic event of the week ‌was Thursday's Bank of England meeting, which saw a rate rise and ‌strong hints that at least one further increase will be needed, barring a sudden de-escalation in the Gulf and a fall in oil prices. Tech stocks tumbled on Wall Street on ⁠Thursday, ​and Asia on Friday, ⁠before broadening out in European trading, giving a boost to the dollar.

The pound was last ⁠at $1.3399, down 0.4%, though roughly flat on the week due to gains in earlier ​sessions. It was at 83.41 pence per euro, steady on the day ⁠and week, and close to its highest since March 2025 which it hit Thursday in the ⁠aftermath ​of the BoE meeting.

"The pound has recently been supported by growing optimism over stronger UK growth, higher UK yields and fiscal concerns becoming a ⁠bigger market issue in the euro area than in the UK," said Hardman. The ⁠BoE policy update ⁠should reinforce sterling's bullish momentum heading into year-end, but one risk for the currency would be a deeper selloff for ‌AI stocks, ‌he added.