The British pound slipped to its lowest level in three weeks after BoE Governor Andrew Bailey signaled the possibility of faster interest rate cuts if the labor market deteriorates. The pound dropped to $1.3467 before closing at $1.3474.
Bailey pointed to growing slack in the economy and increased employer taxes as factors behind the slowdown. Despite a cautious approach, he expressed confidence that rates, now at 4.25%, would continue to decline.
Investor concerns have mounted following GDP contractions in April and May. The KPMG report showed the steepest drop in business hiring in nearly two years, reinforcing worries about the labor market.
Money markets now price in an 85% chance of a rate cut in August, reflecting mounting pressure on the government to address persistent inflation and falling living standards.