Sterling fell to its lowest in three weeks after BoE Governor Andrew Bailey suggested interest rate cuts could be accelerated if the labor market worsens. The pound dropped to $1.3467 before a slight recovery.
Bailey highlighted growing economic slack and increased employer tax burdens as key issues. Despite a measured approach so far, his strong signal about further cuts from 4.25% has shifted market sentiment, following a year of consistent reductions.
GDP contractions in April and May, coupled with the steepest hiring drop in almost two years per KPMG, have deepened economic concerns.
Markets now price in an 85% chance of an August cut, reflecting government struggles with inflation and declining living standards.