Sterling Falls 0.5% to $1.338 as AI Stock Sell-Off Widens
Key Facts
Sterling fell about 0.5% to $1.338 in Friday morning trading on November 6, as the dollar rose on safe-haven demand, according to Reuters. A global sell-off in AI stocks widened, while investors awaited the U.S. jobs report, supporting the U.S. currency. Sterling's decline came a day after the Bank of England decided to raise its key interest rate, but developments in global markets pressured the British currency. In subsequent Reuters coverage, sterling stood at $1.3399, down 0.4%, while remaining nearly unchanged over the week thanks to gains in previous sessions. This reflected the currency's mixed performance over the week, caught between support from British monetary policy and pressure from demand for the dollar.
The Bank of England had raised interest rates by 0.25 percentage points to 4%, in a decision announced on November 5 after a meeting that ended the previous day. Eight members voted for the increase, while one member favored a 0.5-point rise to 4.25%. The bank said consumer price inflation was 3.5% in September and forecast that it would rise to about 5% by mid-2027 before falling. It attributed inflationary pressures to higher energy prices linked to the conflict in the Middle East, saying the increase feeds directly into bills for businesses and households. The tightening decision therefore came as the bank saw inflation potentially continuing to rise, although the currency's path in Friday's session was also affected by a risk-off wave.
Sterling's decline followed a drop in U.S. stocks on Thursday, which Reuters described as the biggest since April 2025. The report linked the stock decline to investors' expectations that major gains for Democrats in this week's U.S. midterm elections would lead to greater scrutiny of the AI sector and limit data-center construction. The sell-off's impact spread to currency markets as the wave went global, while the wait for the U.S. jobs report added to demand for the dollar as a safe haven. Reuters said, "The dollar was supported by safe-haven demand as a sell-off in AI stocks spread around the world." Moves in U.S. Treasuries showed a similar shift toward safety overnight.
The yield on two-year U.S. Treasuries fell about 10 basis points to its lowest level since September 10, while the 10-year yield dropped nearly 6 basis points, according to Reuters. The declines in both yields steepened the yield curve. The move came amid a flight to safe-haven assets accompanying the stock-market drop. In the November 5 session, the sterling/dollar pair had closed at 1.34485, according to EL7 data, before falling in Friday trading. That previous close puts Friday's move in its daily context, while the current-session figures remain tied to the trading time reported by Reuters.
An analyst at Mitsubishi UFJ Financial Group said the Bank of England's update "should strengthen sterling's upward momentum as the year draws to a close," but added that a deepening sell-off in AI stocks was one of the risks to the currency. The assessment reflects the tension between the impact of Britain's rate increase and the prospect of continued demand for the dollar as stock sell-offs widen. The Bank of England stressed that monetary policy "is not on a preset path" and that the committee would assess the evidence at each meeting, while monitoring wages, pricing and spare capacity. The bank set December 17 for its next interest-rate decision, while the Land Registry said September's house price index data would be published on November 18. The latest available release had shown house prices rising 0.9% in the 12 months to August, down from a revised estimate of 1.2% through July.