FX.co ★ Sterling Weakens Further

The British pound declined to $1.342, pulling back from its recent two-week peak of $1.358. This drop was prompted by disappointing UK economic data, which redirected market attention from inflation concerns to worries about slowing growth, even as trade optimism bolstered the US dollar. While warm weather gave a temporary boost to food sales, the overall economic momentum in the UK remains tepid, as highlighted by the underwhelming recent PMI figures. This has led to speculation that the Bank of England might reduce interest rates by 25 basis points in August, with the potential for an additional rate cut by the end of the year, to prioritize economic growth stimulus. Concurrently, the US dollar gained strength after the United States and European Union concluded a trade agreement, entailing 15% tariffs on most EU exports, including automobiles. This agreement, unveiled by President Trump and EU President von der Leyen, alleviated concerns of an impending trade war just ahead of a tariff deadline, thereby providing an additional lift to the dollar.