(Bloomberg) -- The pound sank to its lowest level against the dollar since March 2020 as traders eyed a widening gulf between the Bank of England and Federal Reserve rate-hiking cycles.
The UK currency slid as much as 0.6% to $1.2064, taking year-to-date losses to almost 11%. The currency has been under pressure from a resurgent greenback after hotter-than-expected US inflation for May fueled expectations of a more aggressive Fed tightening.
Concerns grew the BOE might have to take a more cautious approach to raising rates after data Monday showed a surprise contraction in the economy in April. Sterling also faces political risk such as the uncertainty over the fate of the agreement with the European Union over Northern Ireland.
Diverging central-bank approaches could be seen this week, with both the Fed and the BOE set to announce rate decisions.
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