Sterling strengthened on Monday, recovering from an eight-month low reached last Thursday, as investors unwound some holiday-driven moves seen in light trading.

The Pound climbed to a peak of $1.2489 and was up 0.37% at the time of writing at $1.247, rebounding from last week’s low of $1.2353, its weakest level since April, triggered by a Dollar surge fuelled by expectations of robust US growth and increased tariffs in 2025.

Sterling’s rally lacked a clear catalyst, but it coincided with a broader decline in the Dollar against multiple currencies, including the Euro, Swiss Franc, and Canadian Dollar.

“It's a quiet start of January for the UK until British Retail Consortium sales (data) tomorrow and the Recruitment & Employment Confederation report on jobs along with the BoE’s Decision Maker Panel survey, both on Thursday,” stated Jordan Rochester, a currency strategist at Japanese bank Mizuho.

The greenback gained strength in late December and early January, climbing against various currencies and driving the Pound to its lowest level in months, Reuters news agency reports.

Expectations of significantly faster US economic growth compared to other economies, including the UK, alongside President-elect Donald Trump’s potentially inflationary tariff policies, have bolstered the Dollar, which could limit the Federal Reserve’s ability to cut rates, further supporting the greenback.

On Monday, Sterling held steady against the Euro, trading at 82.96 pence per Euro.

Furthermore, traders were factoring in on Monday roughly 55 basis points (bps) of interest rate cuts from the Bank of England for the year, slightly less than the 60-bps expected late last week. This follows the BoE’s 50 bps rate reduction to 4.75% in 2024.

Survey data released on the same day revealed a near standstill in British business activity growth for December. Employers reduced staffing at the fastest pace in nearly four years, reflecting a persistent decline in corporate morale following the government’s budget.