The pound began the third quarter at $1.32, hovering near a seven‑month low after losing 1.4% against the US dollar in June. The decline was driven by political uncertainty, a firmer dollar, and the Bank of England’s dovish policy stance. Investors are closely watching the ECB’s Sintra Forum for signals on the economic outlook and future policy paths.
Bank of England Governor Andrew Bailey noted that the central bank is not in a hurry to react to higher oil prices and reiterated that inflation is still expected to return to the 2% target, albeit later than hoped. He projected that inflation will rise to around 3.2% later this year, up from the current 2.8%.
The dollar, meanwhile, remained supported by expectations of US rate hikes in late 2026. On the political front, investors were also awaiting clarity on the new Treasury chief to replace Rachel Reeves. Andy Burnham, the leading contender to succeed outgoing Prime Minister Keir Starmer, pledged on Monday to maintain fiscal discipline, but provided no further details or indications of possible ministerial appointments.
