The pound dropped to a three-week low after BoE Governor Andrew Bailey suggested the central bank may speed up interest rate cuts if the labor market weakens further. Sterling fell to $1.3467 before closing at $1.3474.
Bailey cited increased economic slack and higher employer taxes as reasons for the slowdown. He maintained a cautious stance but expressed confidence that rates, currently at 4.25%, would continue to fall.
Recent GDP contractions in April and May have raised investor fears about the UK’s economic outlook. The KPMG report highlighted the steepest drop in hiring in almost two years, adding to labor market concerns.
Markets now price in an 85% chance of a rate cut in August, up from 76% last week, as the government faces pressure to address inflation and declining living standards.
