Sterling sank to its lowest in three weeks after Bank of England Governor Andrew Bailey suggested the central bank could accelerate rate cuts if the labor market deteriorates. The pound fell to $1.3467 before closing at $1.3474.
Bailey attributed the economic slowdown to increased slack and higher employer taxes. Although the BoE remains cautious, the Governor is confident that rates, currently at 4.25%, will continue on a downward path.
GDP data for April and May showed unexpected contractions, deepening investor concerns. The KPMG jobs report revealed the steepest decline in hiring activity in almost two years, highlighting the fragility of the labor market.
Money markets now price in an 85% chance of a rate cut in August, reflecting growing pressure on the government as inflation remains above target.
