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
Sterling Slumps to 3-Week Low vs Euro and Continues Decline Against Dollar
Market Reactions and Economic Impacts
By Stefano Rebaudo
Sterling's Performance Amid Geopolitical Tensions
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.
Comparative Currency Movements
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%.
Strategists' Concerns and UK Economic Vulnerabilities
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.
Bond Yields and Pension Fund Pressures
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.
Political and Fiscal Policy Risks
“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.
Upcoming Elections and Economic Data
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.
Recent Economic Indicators
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.
Currency and Central Bank Outlook
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.
Central Bank Policy Expectations
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)
