Published by Global Banking & Finance Review®
Posted on March 30, 2026
3 min readLast updated: March 30, 2026
Add as preferred source on GoogleSterling weakened to its lowest versus the euro in over three weeks and extended losses against the dollar amid fears over the Iran war’s economic fallout. Rising energy prices, persistently high inflation and strained public finances are weighing on both the pound and UK bonds.
By Stefano Rebaudo
March 30 (Reuters) - Sterling slid to its weakest level in more than three weeks against the euro and was on track for a fifth consecutive daily loss versus the dollar, as investors fretted about the impact of the Iran war on the British economy.
The dollar was near a 10‑month high on Monday as mixed signals from Iran and the United States dimmed hopes of a possible quick end to the Middle East conflict.
The pound remains the best-performing currency against the greenback since the war began in early March. Over the same period, the euro has fallen about 2.7%, while the yen declined by 2.4%.
However strategists see it vulnerable as Britain's heavy dependence on imported natural gas, persistently high inflation and stretched public finances have pushed its government bonds into a far steeper decline.
Yields on 10-year Gilts were flat at 4.98% after hitting 5.118% last week, their highest level since 2008.
Some British pension funds have been asked to put up more cash against hedging positions after a sharp selloff in UK government bonds, though the impact so far has been far more limited than during the crisis that torpedoed the premiership of Liz Truss.
“Geopolitical developments have pushed UK politics to the background, but risks of a more expansionary fiscal policy have likely risen in the wake of the energy shock and with the upcoming May local elections,” Barclays strategists said in a research note.
Investors await local elections on May 7 as Keir Starmer's governing Labour Party is trailing the populist Reform UK and the left-wing Green Party.
Economic data showed last week British business activity has grown at the slowest pace in six months and manufacturers' input costs accelerated at the fastest rate since 1992, while retail sales fell.
The pound was down 0.15% at $1.324 against the dollar, after losing 1.67% in March.
The euro was up 0.11% at 86.83 pence after reaching 86.87, its highest level since March 6. It hit 86.12 pence on March 19, its lowest level since August 2025.
Brokerages expect the European Central Bank to raise interest rates as soon as April, while the Bank of England is seen delaying rate cuts.
(reporting by Stefano Rebaudo; editing by Andrew Heavens)
Sterling has fallen due to investor concerns about the impact of the Iran war, high UK inflation, and fragile public finances.
Yields on 10-year Gilts remained flat at 4.98% after hitting a 16-year high of 5.118% last week.
Business activity saw its slowest growth in six months and manufacturing input costs rose at their fastest rate since 1992.
Markets expect the European Central Bank to hike rates soon, while the Bank of England is seen delaying rate cuts.
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