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Friday, Sep 04, 2026

Pound Plummets to 14-Month Low Amid Concerns Over UK Borrowing Costs

FTSE 100 Index Rises Despite Weakness in Retail Stocks as Multinationals Benefit from Sterling Decline
In a tumultuous turn of events, the British pound fell to a 14-month low on Thursday, as investors expressed growing concern over the UK’s borrowing costs.

Despite the currency’s slide, the FTSE 100 index climbed to a four-week high, driven by gains in multinational companies that benefited from a weaker sterling.

By the end of the trading day, the pound had dropped 0.58% against the US dollar to $1.229 and 0.34% against the euro to €1.193.

The significant dip in sterling coincided with a drop in the yield on the UK’s 10-year government bonds, reaching lows not seen since the 2008 financial crisis.

Government officials were quick to respond, reassuring investors that there was 'no need for emergency intervention,' which helped stabilize bond yields in the afternoon.

London’s financial markets found support from the international nature of many of the companies listed on the FTSE 100, despite challenges faced by UK-centric retail stocks.

Marks & Spencer, a stalwart of the British high street, experienced a decline as it flagged uncertainty due to rising costs, even as it reported robust Christmas trading figures.

Marks & Spencer’s shares fell by 8.4% to 345.3p.

Chris Beauchamp, Chief Market Analyst at IG, noted that 'the turmoil in gilts and sterling has understandably caught everyone’s attention, but the FTSE 100 has managed another strong day today.

Sterling weakness has proven to be a boon once again, and the international nature of many of the index’s members mean there is little read-across from the doom-laden trading in UK-focused assets.' The mining sector led gains on the FTSE 100, buoyed by a global rebound in commodity prices.

Contrastingly, major European indices showed more modest movements: France’s Cac 40 rose 0.51%, while Germany’s Dax dipped marginally by 0.05%.

Trading across the Atlantic was muted, with US stock markets closed for the funeral of former President Jimmy Carter.

In other corporate updates, Tesco’s shares slipped 0.5% to 368p despite the retail giant reporting a positive festive trading period with a 3.7% increase in like-for-like sales across the UK and Ireland.

Bakery chain Greggs also faced investor disappointment, with its shares plummeting 15.8% to 2,210p after it cautioned over a 'more challenging market backdrop' ahead.

Nevertheless, the day saw positive movements for some firms.

Banknote producer De La Rue saw an 8.3% increase in its share price to 111p following a £245 million takeover approach from a British financier.

Additionally, Brent crude oil prices recovered by 1.02% to $76.94 per barrel, as traders bought into the dip following a sharp previous session decline.

The notable risers on the FTSE 100 included Anglo American, Antofagasta, Fresnillo, Compass Group, and DS Smith, while the biggest fallers were Marks & Spencer, Entain, Sainsbury’s, Centrica, and WPP.
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