The pound regained some ground on Monday, rising against both the dollar and the euro after two tough weeks of declines. Investors hit pause following the selloff, which had been driven by

worries over the UK’s shaky economic outlook and rising public debt.

The U.S. dollar slipped at the start of the week, weighed down by fears of a potential government shutdown. Traders are also holding back ahead of a series of U.S. economic reports that could give more clues about the Federal Reserve’s next moves on interest rates.

A surprise jump in UK borrowing and weaker momentum across manufacturing and services have dented confidence in the pound in recent weeks. Still, sterling managed to edge up 0.26% to $1.3434 on Friday, chipping away at its 1.15% loss over the past fortnight. Over the same period, the dollar index slipped about 0.6%.

Markets are also watching politics. The Labour Party conference kicked off in Liverpool on Monday, and analysts say debates over spending and welfare could influence market sentiment. “If the government gives in to pressure from the party’s left—like scrapping the two-child benefit cap—it could spook investors and weigh on gilts and sterling,” said Chris Turner, ING’s head of forex strategy.

UK government bond yields, which had spiked to their highest levels in decades earlier this month, eased slightly on Monday. Meanwhile, Finance Minister Rachel Reeves warned that tough choices lie ahead to keep public finances in check.

Looking at monetary policy, some analysts see the Bank of England moving to cut rates as soon as December if growth slows further and inflation continues to cool. Markets are already pricing in small cuts through 2026, while BoE policymaker Swati Dhingra has openly said the bank should move faster to bring borrowing costs down.

As for the euro, it slipped 0.15% to 87.16 pence, its weakest level since late September. Traders expect the European Central Bank to keep rates elevated for longer, holding steady well into 2026.