Published by Global Banking & Finance Review®
Posted on September 1, 2025
2 min readLast updated: January 22, 2026
Add as preferred source on GoogleSterling is declining against the euro due to UK fiscal concerns, affecting bank shares and gilt yields. Investors await key economic data and budget announcements.
(Corrects paragraphs 3 and 5 to say 30-year gilt yields were near their highest levels since the late 1990s, not hit that milestone on Monday)
By Stefano Rebaudo
(Reuters) -Sterling rose against a weakening dollar on Monday but was on track for a 3-day falling streak versus the euro, as investors awaited U.S. economic data later this week amid renewed concerns over Britain’s fiscal outlook.
Weakness in the pound has coincided with a decline in British bank shares and an uptick in benchmark Gilt yields on Friday.
"The UK is in a fiscal bind," said Stephen Jen, CEO of Eurizon Capital, recalling that the 30-year gilts yields were around their highest levels since the late-1990s while fiscal spending remains at a Maastricht-busting level of 4.4% of gross domestic product.
"In our view, its fiscal revenues are about to move to the bad side of the Laffer Curve, higher tax rates will probably start to lead to lower tax collection," he added.
The yield on the 30-year gilt hit 5.646% on Monday. It reached 5.649% in early April, its highest since 1998.
The pound was up 0.18% to $1.3528 and was down 0.14% to 86.65 pence per euro.
The greenback hit a 5-week low on Monday as investors looked ahead to a raft of U.S. labour market data this week that could affect expectations for the Federal Reserve's easing path.
Investors will closely watch the questioning of Bank of England Monetary Policy Committee members by the Treasury Committee later this week, looking for guidance on future rate cuts or possible changes to the central bank’s quantitative tightening program.
Parliament returns from its summer recess this week, and an announcement on the date of the Autumn Budget could follow.
“If the UK government wants the Bank of England to be able to react, by cutting rates, to a fiscally tight budget, it will have to announce the budget date this week,” said Chris Turner, head of forex strategy at ING, recalling that the Office for Budget Responsibility requires 10 weeks' notice for the budget, and the November BoE meeting is held on the 6th.
(Reporting by Stefano Rebaudo; editing by Toby Chopra)
The pound is on track for a three-day decline against the euro due to renewed fiscal concerns and a decline in British bank shares.
The yield on the 30-year gilt was 5.646% on Monday, nearing its highest levels since the late 1990s.
Investors are looking ahead to U.S. economic data later this week, which could influence expectations for the Federal Reserve's monetary policy.
The announcement of the Autumn Budget date is crucial as it may allow the Bank of England to react by cutting rates in response to a fiscally tight budget.
On Monday, the pound rose against a weakening dollar, increasing by 0.18% to $1.3528.
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