FX.co ★ Sterling Falls Toward 7-Week Low

The British pound has dipped below $1.34, approaching a seven-week low, as investors assess potential inflation risks and the Bank of England's monetary policy direction. Bank of England policymaker Megan Greene advised caution regarding rate cuts, suggesting a pause in November. Meanwhile, Governor Andrew Bailey indicated that further easing might still be necessary. This difference in views emphasizes the uncertainty surrounding UK economic conditions, particularly as inflation, the highest among G7 nations, reached 3.8% in August and is forecast to peak at 4% before gradually aligning with targets by 2027. Political concerns have also contributed to the pressure, with Greater Manchester Mayor Andy Burnham advocating for the renationalization of essential services and proposing £40 billion in borrowing for housing, a proposal likely to unsettle gilt markets, which are already experiencing weakened demand at bond auctions. The pound's decline was exacerbated following unexpectedly strong US GDP revisions, which bolstered the dollar and reduced expectations for Fed rate cuts.