Yesterday saw a continuation of Friday’s risk-off sentiment, with most global markets closing in the red — some even referring to it as a “Black Monday.” Among the biggest losers was the British pound (GBP), which took a significant hit against most major currency pairs. Sterling has faced a string of difficult trading sessions, and the pressure may not be over just yet.
GBP is often referred to as a ‘beta’ currency — meaning it tends to outperform in strong market conditions but underperforms when uncertainty and risk aversion dominate. We’re currently seeing the latter play out, with holders of sterling moving to sell off their positions in favor of perceived safer currencies.
Adding further weight to the pound are the mounting macroeconomic concerns: ongoing trade wars, a slowdown in global growth, and rising prices on international trade. These trends are tightening the UK government’s already limited fiscal flexibility. With elevated debt levels and constrained economic tools, confidence in the UK economy is weakening further.
The key question now: what steps will the government take to protect growth and prevent further deterioration? Until we see clarity or decisive action, investor sentiment may remain cautious.
Reflecting this pressure, GBP/EUR has dropped to an 8-month low, now just 0.75% off a yearly low. Meanwhile, GBP/USD has fallen sharply, sliding from 1.31 on Friday to a mid-mark of 1.27, despite the USD itself losing ground against most other major currencies.
After yesterday’s major volatility, markets are tentatively hoping for a period of stability and potential recovery. European stock markets opened higher this morning, offering some hope that this momentum might carry over to the UK and later the US.
In the background, investors are also keeping a close eye on potential retaliation from Europe in response to US-imposed tariffs. We’ve already seen China respond with stimulus measures to support its economy — a move that helped ease investor nerves and stabilize risk sentiment, at least temporarily.
GBP/EUR 1.1649 GBP/USD 1.2749 GBP/AED 4.6828
GBP/AUD 2.1049 GBP/CHF 1.0957 GBP/CAD 1.8089
GBP/NZD 2.2769 EUR/USD 1.0934 GBP/ZAR 24.8723