The pound has fallen to its lowest level in over four months, driven by growing concerns about the health of the UK economy.
Sterling declined against the dollar to $1.263 today, its weakest since June 26, after reaching a high of $1.3410 on September 26.
Fresh economic data released this morning showed that the UK economy expanded less than expected in the third quarter, posing a setback for the Labour government, which has been aiming for strong growth.
The Office for National Statistics reported that GDP increased by just 0.1% in the July-September period, a slowdown from 0.5% growth in the second quarter and below the 0.2% growth forecast by analysts.
“The latest UK GDP data highlights the cooling impact of a pre-Budget period filled with warnings of tough decisions ahead,” said Russ Mould, investment director at AJ Bell.
The dollar, on the other hand, has gained since the U.S. election, fueled by expectations that Trump’s policies, including tariffs and tax cuts, could drive inflation, leaving the Federal Reserve with less room to cut interest rates.
However, the dollar slipped 0.1% today against a basket of major currencies.
Capital Economics projected further strength for the dollar, anticipating a 5% rise against a basket of currencies by the end of 2025.
“This forecast is based on the expectation that Trump will move forward with his proposed core tariff policies and that the U.S. economy and stock market will continue to outperform major global peers,” the firm stated.
