The British Pound weakened against the U.S. Dollar on Thursday, slipping by 0.1% to $1.204. This comes after policy minutes from the Federal Reserve boosted the U.S. currency.
Mass investor anxiety has arisen from UK inflation concerns, which could lead to a weakened British economy is realized. Inflation hit 10% on Wednesday, adding pressure to the Bank of England to bring down prices in an effort to combat an impending economic slowdown. British two-year government bond yields remain sky-high on Thursday after hitting their highest levels on Wednesday since November 2008.
Despite weakening against the dollar, the Pound Sterling made a marginal gain to 84.89 pence. “The main observation on yesterday was how big the reaction in the rates markets was compared to almost no reaction in sterling,” Adam Cole, chief currency strategist at RBC Capital Markets observed.
Additional uncertainty has arisen from the political sphere, where the Conservative Party is heading a leadership race to determine the successor of British Prime Minister Boris Johnson. Liz Truss is the current frontrunner, with her spending plans and potential review of financial regulations coming into the spotlight as a result.