The pound hovered just above $1.32, close to a seven-month low after falling 1.4% against the dollar in June, weighed down by political uncertainty, a stronger US currency, and the Bank of England’s dovish rhetoric. By contrast, sterling climbed to a one-year high against the euro as the single currency softened following weaker-than-expected euro area inflation data. Investors are now looking to the ECB’s Sintra Forum for fresh signals on the economic outlook and future policy moves.
Bank of England Governor Andrew Bailey reiterated his dovish stance in an interview with CNBC, noting signs of a cooling UK economy and stressing that the decision in May to keep interest rates on hold at 3.75% reflected that assessment. While ruling out imminent rate cuts due to ongoing inflation risks, he acknowledged that falling energy prices have contributed to progress in bringing inflation down.
In the United States, Federal Reserve Chair Kevin Warsh offered no new policy guidance, leaving market expectations intact for additional rate hikes later this year. In UK politics, markets continued to weigh the prospect of Ed Miliband becoming Chancellor, though fiscal concerns have eased somewhat following Andy Burnham’s pledge to maintain discipline on public finances.
