The pound slumped to a three-month low against the dollar and UK borrowing costs hit a six-month high yesterday as dismal growth figures and the war in the Middle East took their toll on markets.
Sterling dipped by more than a cent to just above $1.32 after the Office for National Statistics (ONS) said the economy had ground to a halt with zero growth in January.
That left the pound on course for a fall of nearly 1.3 per cent for the week, its worst performance against the dollar since the start of 2025.
It has dropped by more than two cents since the start of the war as global market uncertainty has driven investors to pile into the safe-haven dollar.
Slump: The pound has dropped by more than two cents since the start of the war as global market uncertainty has driven investors to pile into the safe-haven dollar
Investors have also been dumping UK bonds, known as gilts. Yesterday, yields on ten-year gilts, which rise as their prices fall, climbed to nearly 4.83 per cent, the highest since September.
Higher gilt yields mean steeper borrowing costs for Chancellor Rachel Reeves, reducing the ‘headroom’ she has available to meet Budget targets.
Economists had been hoping for better from the ONS figures, having pencilled in a 0.2 per cent rise in gross domestic product for January.
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