Sterling weakened against both the Dollar and the Euro on Monday as investors avoided risk-sensitive assets due to growing uncertainty around global trade policies and increasing concerns about a recession triggered by US President Donald Trump's tariffs.

Global financial markets took a significant hit on Monday after Trump warned foreign governments that they would have to pay “a lot of money” to have the tariffs removed, which he referred to as “medicine.”

The Pound fell to a new one-month low of $1.2825 and was last down 0.5% against the Dollar. On Friday, it had dropped about 1.5%, marking its biggest single-day decline since March 2023.

Against the Euro, the Pound weakened to 85.38 pence. It also lost value against traditional safe-haven currencies like the Japanese Yen and the Swiss Franc.

On Monday, investors significantly increased their bets on the Bank of England cutting interest rates. At the time of writing, markets had fully priced in a quarter-point rate cut by the BoE in May, Reuters reports.

Initially, the British currency had held steady against the greenback when Trump's sweeping tariffs, including the 10% tariff on Britain, were announced last week. Traders' immediate reaction at the time was to sell the Dollar.

However, concerns about a recession have sparked a broader sell-off in global stock markets, prompting investors to flock to safe-haven assets.

“I guess there was some hope over the weekend that maybe we would see this as part of the start of a negotiation, but the messages that we've so far seen suggest that the President Trump is comfortable with the market reaction and that he's going to continue on this course,” according to Richard Flax, chief investment officer at Moneyfarm.

On Monday, Britain eased its demands on automakers to shift to the production of electric vehicles, aiming to reduce the pressure on an industry that has been severely impacted by Trump's tariffs.