The pound has fallen against both the euro and the US dollar amid growing political and fiscal uncertainty in the UK.
Sterling dropped 0.60 per cent against the euro to trade at 1.1573, and slipped 0.95 per cent against the US dollar to 1.3615.
The fall comes amid political uncertainty, with reports suggesting Chancellor Rachel Reeves could face the sack following Labour’s U-turn on the welfare reform bill.
However, Downing Street has firmly denied speculation that Reeves could be ousted from her role, following a tense moment during Prime Minister’s Questions in which the Chancellor appeared visibly shaken.
A spokesperson for Sir Keir Starmer said Reeves has the "full backing" of the Prime Minister and has "not offered her resignation," adding: "The Chancellor is going nowhere."
UK bond yields have also edged slightly lower, with the one-month gilt yield now at 4.28 per cent - down from 4.38 per cent a week ago and 4.39 per cent a month ago.
The Pound had fallen against the Euro
The Pound remains under pressure against the euro as market analysts point to lingering concerns over UK fiscal policy.
ING noted that "EUR/GBP remains underpinned by a bullish bias, with the welfare reform reversal doing little to alter that outlook," adding that the currency pair could test fresh lows depending on upcoming UK economic data.
Sterling's dip follows speculation that multiple Government U-turns on welfare reform could pave the way for further tax increases to fill emerging budget gaps.
Rachel Reeves was seen crying in Parliament
GBNEWS
However, UK Government bond markets have held relatively steady, with 10-year gilt yields hovering near 4.50 per cent. This has helped limit sharper losses for the Pound in the near term.
Looking ahead, MUFG expects GBP/EUR to settle around 1.1630 by the end of 2025.
The euro came under pressure on Wednesday after Eurozone labour market data missed forecasts, fuelling concerns over the region's economic resilience.
Unemployment across the bloc unexpectedly rose to 6.3 per cent in May, up from the record low of 6.2 per cent, dampening investor confidence and weighing on the single currency in mid-week trade.
The pound fell to a two-month low against the euro early Tuesday, touching 1.1640 before edging back to around 1.1655.
The euro has held firm across major currency pairs, benefiting from declining investor confidence in the US dollar.
The pound fell to a two-month low against the euro early Tuesday
PATory leader Kemi Badenoch said Reeves looked “absolutely miserable” and challenged the Prime Minister to say whether she would keep her job until the next election.
Starmer dodged the question about whether Ms Reeves would be in place for the remainder of the Parliament, saying Badenoch “certainly won’t”.
Changes to restrict eligibility for the personal independence payment (Pip) were abandoned on Tuesday just 90 minutes before MPs voted on them, wiping out the savings that Reeves had counted on to help meet her goal of funding day-to-day spending through tax receipts rather than borrowing.
Badenoch said: “Today the Prime Minister refused to back his Chancellor, leaving her humiliated.
“She is the human shield for his expensive U-turns. How can anyone be a chancellor for a man who doesn’t know what he believes and who changes his mind every other minute?”
Most Read
