The British Pound’s recent rally could face a sharper reversal as investors turn their attention from UK political relief to the country’s borrowing outlook, according to UniCredit.
Pound Sterling had strengthened on expectations that the change in government would reduce political uncertainty, but the gains began to unwind as concerns over fiscal policy resurfaced.
GBP/USD fell back below 1.34, while EUR/GBP recovered above 0.85, reversing much of Sterling’s advance from the previous week.
UniCredit argues that sovereign debt concerns in the UK and Japan could provide the catalyst needed to break the unusually calm conditions across major currency markets.
The bank notes that three-month GBP/USD implied volatility remains exceptionally low compared with previous periods of UK fiscal stress.
During the Truss government crisis in autumn 2022, the measure surged above 17% as markets reacted to unfunded tax cuts and borrowing plans.
The current concern is that higher UK bond yields are increasingly being interpreted as evidence of fiscal vulnerability rather than as a source of currency support.
The 10-year gilt yield has risen above 5%, with UniCredit attributing much of the increase to renewed worries over government borrowing and the future debt burden.
UK yields have climbed by around 53 basis points since the start of the year, more than comparable German and US yields.
Market confidence was also weakened by Prime Minister Andy Burnham’s appointment of John Healey as Chancellor rather than the more fiscally conservative Shabana Mahmood, alongside the decision to remove the 5% VAT charge on domestic electricity bills from October.
According to UniCredit, renewed debt concerns have already “reversed last week’s gains in sterling against both the USD and the EUR.”
The bank sees UK fiscal policy as a potential “fulcrum” for a larger currency move.
Further increases in gilt yields driven by borrowing fears could therefore put additional pressure on GBP/USD and allow EUR/GBP to extend its recovery.
Pound Sterling Prices: This Week
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | +0.59% | +0.97% | +0.89% | +0.53% | -0.04% | +0.89% | +1.34% | |
| EUR | -0.58% | +0.38% | +0.31% | -0.06% | -0.62% | +0.30% | +0.75% | |
| GBP | -0.96% | -0.38% | -0.07% | -0.43% | -1.00% | -0.07% | +0.37% | |
| JPY | -0.89% | -0.31% | +0.07% | -0.36% | -0.92% | 0.00% | +0.44% | |
| CAD | -0.53% | +0.06% | +0.43% | +0.36% | -0.57% | +0.36% | +0.80% | |
| AUD | +0.04% | +0.63% | +1.01% | +0.93% | +0.57% | +0.93% | +1.38% | |
| NZD | -0.88% | -0.30% | +0.07% | 0.00% | -0.36% | -0.92% | +0.44% | |
| CHF | -1.32% | -0.74% | -0.36% | -0.44% | -0.80% | -1.36% | -0.44% |
The FX heat map compares how Pound Sterling (GBP) has performed against a basket of major currencies over the past week. The largest move was against the Australian Dollar, where Pound Sterling recorded its sharpest decline. Data comparing prices today (25/07/2026 13:46 UTC) and daily close on 18/07/2026.
To read the table, choose the base currency from the left-hand column and then move across to the quote currency along the top row. For example, the GBP row and USD column shows the weekly percentage move in GBP/USD.
Our currency coverage draws on live market data, official economic releases and published bank research.
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