Pound falls to lowest level in over a year as UK government borrowing costs rise

The British pound has fallen nearly 1% to just under $1.23, its lowest level against the US dollar since November 2023. This decline comes as UK government borrowing costs continue to rise, with yields on 10-year bonds reaching their highest since 2008. Government bond yields have increased, reflecting higher borrowing costs. The yield on 30-year gilts is now at its highest level since 1998. This situation raises concerns about the UK’s fiscal sustainability and may force the government to consider spending cuts or tax hikes. Chancellor Rachel Reeves faces challenges in managing public spending amid rising debt costs. After the autumn Budget, she has limited financial headroom, which may lead to a focus on spending cuts in her upcoming fiscal statement.