Sterling fell to its lowest level against the dollar since November 2023, while government borrowing costs continued to rise.
Sterling fell to $1.21 on Monday morning as the recent sell-off continued.
At the same time, the rate at which the government can borrow money – known as yield – has risen again, reaching its highest level since 2008 by one measure.
Borrowing costs for many countries are rising around the world, although some say decisions in the Budget have left the UK particularly vulnerable.
Governments typically borrow money by selling bonds to large investors, such as pension funds. UK government bonds are known as Gilts.
The yield on the 10-year Gilt – the interest rate at which the government repays a ten-year loan to investors – rose to 4.89%, its highest level in almost two decades.
The 30-year gilt rose 5.5%, its highest level in 27 years.
The cost of public debt in Germany, France, Spain and Italy also increased as markets opened Monday morning.
Some experts say investors are reacting to former U.S. President Donald Trump’s re-election and his talk of tariffs.
There are concerns that this will lead to more persistent inflation than previously thought, and that interest rates will therefore not fall as quickly as expected, both in the United States and elsewhere.
Strong U.S. jobs data released Friday also reinforced expectations that U.S. rates would stay high for longer, helping to strengthen the value of the dollar against other currencies.
However, Emma Wall, head of investment platforms at Hargreaves Lansdown, said the UK’s problems were not solely caused by global issues, arguing that measures announced in the Budget had fueled inflation.
“If you can get inflation under control you will see interest rates fall in the UK,” she added.
