Sterling Plunges to Three-Month Lows Amid Oil Fears

The British pound has fallen to its lowest level in three months against the US dollar, as concerns over high interest rates, oil prices, and inflation continue to weigh on European markets.

Sterling fell by as much as 0.5% on Thursday to a low of $1.3193, breaking below the $1.32 mark for the first time since late June.

Investors are fretting about the long-term impact of oil prices above $100 a barrel, which could lead to higher borrowing costs and inflation.

The FTSE 100 index fell by as much as 2% before recovering some losses, while British 30-year gilt yields topped 6% for the first time since early 1998, just four weeks ahead of the Autumn Budget.

Russ Mould, investment director at AJ Bell, warned that rising gilt yields pose a major challenge to Prime Minister Andy Burnham and Chancellor John Healey's spending and borrowing plans.