Sterling slips as equity selloff lifts dollar despite Bank of England rate support
Global market turbulence is weighing on sterling at the end of the week, offsetting support from the Bank of England's latest policy tightening. The pound falls against the dollar as investors shift toward safer assets, while it remains broadly steady against the euro near a 19-month high.
Highlights
- Sterling falls 0.4% to $1.3399 as a global tech-led equity selloff fuels dollar demand and pressures growth-sensitive currencies.
- The Bank of England raises rates and indicates at least one more hike unless Gulf tensions ease and oil prices drop.
- Euro-sterling trades steady at 83.41 pence with pound near its strongest since March 2025, aided by firm UK growth outlook and higher yields.
Bank of England signals meet broader market risk aversion
As reported by Reuters, sterling drops 0.4% to $1.3399 on Friday as a selloff in global equities, led by technology shares, boosts demand for the dollar and pressures currencies more exposed to global growth.The main UK event of the week is Thursday's Bank of England meeting, which delivers a rate rise and strong signals that at least one further increase will be needed unless tensions in the Gulf ease suddenly and oil prices fall. Lee Hardman, senior currency analyst at MUFG, says the market impact of the BoE update is being overshadowed by the deepening selloff in AI-related investments.
Tech stocks tumble on Wall Street on Thursday and in Asia on Friday before losses spread through European trading, reinforcing the dollar's gains. Even so, sterling remains roughly flat on the week after stronger performances earlier in recent sessions.
Euro-sterling stability reflects relative UK support
The pound trades at 83.41 pence per euro, steady on both the day and the week, and stays close to its strongest level since March 2025, reached after the BoE meeting.Hardman says sterling has recently been supported by improving confidence in UK growth, higher UK bond yields and investor concern that fiscal issues are becoming a bigger market problem in the euro area than in the UK. He adds that the BoE policy update should reinforce the pound's bullish momentum into year-end, although a deeper selloff in AI stocks remains a key downside risk for the currency.
Our earlier coverage of the AI-linked tech selloff noted a sharp drop across semiconductors and other infrastructure plays as investors reassessed stretched valuations. We also highlighted how oil’s rise toward $110 a barrel added inflation worries that could keep the Fed tighter for longer, reinforcing broader market volatility and caution.
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