LONDON, January 2, 2025 - The British pound has fallen to its lowest level against the U.S. dollar in nearly nine months, trading at $1.2422, a drop of 0.82% on the day. This decline follows expectations of dollar-friendly policies from incoming U.S. President Donald Trump, which have intensified demand for the dollar.
The euro also experienced a significant decline, reaching a more than two-year low against the dollar, while the Japanese yen and most other currencies weakened as well, albeit less severely than the pound.
Analysts suggest that Trump's anticipated policies may stimulate growth but could also lead to increased inflation, prompting the Federal Reserve to be cautious about further rate cuts. This scenario is expected to support U.S. Treasury yields and bolster the dollar's strength.
The pound's recent decline marks a reversal from last year's trend, where it depreciated less than any other G10 currency against the dollar. Economic data from the UK has pointed towards a sharper-than-expected slowdown, leading to increased pessimism regarding the economic outlook and contributing to the pound's sell-off.
Despite the current economic challenges, the Bank of England has not indicated a shift from its gradual approach to interest rate cuts. The euro saw a slight increase against the pound, trading at 83.09 pence.