• GBPUSD drops below $1.23 – lowest since Nov 2023
• Higher UK rates fail to offset dollar strength and concerns
• Bank of England may cut rates despite inflation above 2%
• US trade tensions and fiscal fears weigh on the pound

The British pound has slumped below $1.23, its weakest level since Nov 2023, as the strength of the US dollar eclipsed the impact of elevated UK borrowing costs, which are near their highest in 27 years.

Adding to the currency’s challenges are growing concerns about US trade measures. President-elect Donald Trump may invoke a national economic emergency to implement broad tariffs targeting both allies and adversaries.

On the domestic front, investors are forecasting a potential 50 basis point interest rate cut from the Bank of England later this year, despite inflation staying above the 2% benchmark.

UK gilt yields have climbed sharply, outpacing those of US Treasuries, but the pound has remained under pressure, unable to counterbalance the dollar’s momentum.

Elevated interest rates typically boost a currency's attractiveness, but in this case, the steep decline could signal capital outflows as investors grow anxious about enduring inflation and concerns over fiscal stability.

This convergence of global and domestic factors continues to weigh heavily on the British currency.

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