Traders Bet on Pound Dropping by 8% - on Miserable Morning for Markets

By Evans Momodu
1 minute read


Traders are bracing for the pound to fall by up to 8%, with market activity pointing to significant downward pressure on sterling.

As Bloomberg reports, there is strong demand for contracts anticipating the pound dropping below $1.20, with some even betting on levels below $1.12—marking the weakest performance in over two years.

The pound, trading near $1.21 this morning, has been impacted by rising UK government borrowing costs. The 30-year gilt yield hit 5.47%, its highest since 1998, while the 10-year gilt yield, though slightly lower than last week's peak, remains elevated.

High borrowing costs increase fiscal pressures on the government, raising concerns over potential breaches of fiscal rules and the possibility of further spending cuts or tax hikes.

Jamie Niven of asset management firm Candriam told Bloomberg that the "path of least resistance is lower" for sterling. He cited limited expectations of Bank of England rate cuts and fiscal concerns as factors weighing on the currency.

Adding to the economic woes, oil prices have spiked, with Brent crude trading at $80.79 per barrel, its highest level since October 2024. Rising oil prices exacerbate inflationary pressures, particularly when paired with a weaker pound, which makes dollar-denominated imports more expensive.

The stock market has also been rattled. The FTSE 100 fell 0.32%, erasing last week's gains, while the FTSE 250 dropped to a near nine-month low. Together, these developments reflect growing investor concerns about the UK's economic outlook and financial stability.
Source: Sky news