Pound Sterling hit a 15 month low. (Image: Getty)
was under pressure on Monday, slumping to a 14-month low and trading at 1.2149 against the US Dollar.
The was forecast to open 22 points lower at 8226, falling .9% since Friday. Meanwhile, UK 10-year Gilt yields climbed to their highest levels since the 2008 financial crash at 4.843.
Gilt yields, which reflect the cost of government borrowing, move inversely to prices. This means when yields rise, it becomes more expensive for governments to borrow.
The sharp increase in gilt yields has been linked to a broader global sell-off in bonds.
Experts at Trading Economics said: “Typically, higher yields typically boost a currency, but the decline points to capital flight driven by fears of persistent inflation and fiscal instability.
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“Rising borrowing costs also strain Chancellor Rachel Reeves, whose fiscal flexibility is shrinking. In October, Reeves unveiled a budget including £142billion in borrowing and a £74billion annual spending increase, raising fiscal sustainability concerns.
“Inflation fears also persist, with CPI, wage growth, and inflation expectations rising.”
Traders now expect only two Bank of England rate cuts this year, down from over three predicted a month ago.
Oliver Faizallah, head of fixed income research at Charles Stanley, commented: “We’ve seen a global bond sell off driven by elevated inflation globally, volatile politics and political policy (with US tariffs being a large focus on future inflation) and increasing government debts.
“UK government bonds have been punished and sold off more so than the rest of the world. This seems to be due to concerns around sticky inflation leading markets to believe we’ll have higher for longer.”
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Ms Reeves came under fire last week for proceeding with a planned trip to China rather than remaining in the UK to address the country’s economic woes.
During her trip over the weekend, Ms Reeves insisted her fiscal rules were “non-negotiable” and said she would “take action” if necessary to ensure they were met.
The Chancellor’s Cabinet colleagues have sought to defend her, with Health Secretary Wes Streeting urging the public to “give her time”.
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