Home Daily Commentaries GBP/USD touches lowest level since Nov 2023 as Gilt yields soar

GBP/USD touches lowest level since Nov 2023 as Gilt yields soar

Jake Trask
Written by
Jake Trask

Jake Trask

OFXpert

Based in London, Jake boasts a rich and extensive career in the foreign exchange industry, spanning 15 years.

| Thursday 9 January, 2025

Daily Currency Update

GBP/USD fell overnight as UK government borrowing costs reached their highest level since the 2008 financial crisis. The yield on benchmark 10-year Gilts is nearing 5%, surpassing levels seen in the aftermath of the disastrous mini-budget by Liz Truss and Kwasi Kwarteng in September 2022.

Although rising yields are a global trend, concerns about the UK economy entering a period of stagnating growth and above-target inflation ("stagflation") have led financial markets to shun sterling, causing a sharp drop in its value over the past couple of days. GBP/USD touched 1.2238 this morning, its lowest level since November 13, 2023.

The pound was already under pressure from a strong US dollar, bolstered by better-than-expected data from the US, as well as the potential for incoming US President Donald Trump to announce a raft of tariffs on goods shipped to the States. These fast-moving developments have added further pressure on sterling, along with Chancellor Rachel Reeves’ recent significant tax increases, which have severely impacted business confidence.

While the pound appears to have stabilised for now, expect heightened scrutiny of UK economic data in the coming weeks for further signs of stagflation. GBP/EUR has also been affected, dropping from around 1.2070 to a low of 1.1899 this morning. Like GBP/USD, it has stabilised for now, currently trading at 1.1925.

Key Movers

The minutes from the latest Federal Open Market Committee meeting were released yesterday evening, revealing that the decision to cut interest rates at the December 18th policy meeting was a close call.

With data from the US continuing to outperform and the prospect of economic policies likely to drive inflation higher being implemented by President-elect Trump, it’s unlikely we will see any significant dollar weakness anytime soon.

Today has been declared a national day of mourning to honor former US President Jimmy Carter, who passed away recently. As a result, stock markets will be closed for the day, so thinner-than-usual trading volumes are expected.

Tomorrow brings this week’s key event with the December jobs report. The headline Non-Farm Payrolls figure is expected to show that 164,000 people found employment during the month, while the unemployment rate is predicted to remain steady at 4.2%.

EUR/USD continues to hover near multi-year lows, currently trading at 1.0305.

Expected Ranges

  • GBP/USD: 1.2200 - 1.2340 ▼
  • GBP/EUR: 1.1880 - 1.2000 ▼
  • GBP/AUD: 1.9760 - 1.9925 ▼
  • EUR/USD: 1.0270 - 1.0390 ▼

Written by

Jake Trask

OFXpert

As a Senior Corporate Client Manager, Jake and his team manage a diverse portfolio of 250 businesses to meet their varied foreign exchange needs. He enjoys untangling the complexities of foreign exchange dynamics, constantly striving to provide clients with the most informed insights and strategies to navigate these fluctuations successfully.