Following a nearly two-year high last week, sterling has slumped 0.2 per cent to 1.40, down from a high of 1.43, its biggest weekly loss in 10 weeks.
The pound is facing similar troubles against the euro, dropping 0.1 per cent this morning and struggling to hold onto €1.1401 and avoid its lowest rate for April.
Meanwhile, the US dollar is continuing to surge after a strong performance on Friday, when it posted gains against all major currencies.
“The US dollar index surged on Friday, touching its highest level since April 6, buoyed by a sharp rise in longer-term US bond yields,” said Marios Hadjikyriacos, investment analyst at XM. “The yield on 10-year US Treasuries touched 2.98 per cent on Monday, a fresh high last seen in 2014, helping to increase the appeal of the greenback.”
Last week, the euro fell to a two-week low against the dollar, its biggest weekly drop in two months. The European currency is likely to continue to struggle after todays IHS Markit PMI showed a sharp drop in manufacturing.
The pound may continue to struggle over the coming week, as the probability of a May rate rise has dropped after Mark Carney reversed his position on an imminent increase in interest rates.
Read more: Dollar firms as pound maintains strong gains
However, according to Rebecca OKeeffe, head of investment at Interactive Investor, interest rates are just one of many concerns which may affect sterling in the coming weeks:
“With UK economic growth lagging behind all other major economies, and the path of Brexit once more looking distinctly rocky, sterlings recent strength is in danger of reversing sharply, particularly if Prime Minister Mays position comes under further pressure.”