Sterling faces risks from Bank of England rate cut concerns – London Business News | Londonlovesbusiness.com

On Friday, the British pound stabilised, after a rebound in Thursday, but remained close to its one-month low against the dollar.

This slight recovery followed a broader market stabilisation after a volatile start to the week. Despite the rise, the pound could be on track for its fourth straight weekly decline.

The Bank of England’s (BoE) recent interest rate cut has put pressure on the pound, contributing to its ongoing weakness. Additional cut expectations could continue to weigh on the currency.

However, greater interest cut expectations regarding US monetary policy could alleviate the Pound’s decline against the US dollar. Markets are currently pricing in a full percentage point reduction in Fed rates this year when rate cuts could be more limited in the UK in comparison.

However, a softer monetary policy could weigh on yields in the UK which remain in a downward trend despite a rebound during the few previous trading sessions. Traders could continue to monitor upcoming economic data to evaluate the next steps in monetary policy.

On Tuesday, market participants will focus on the UK’s June unemployment rate report. If unemployment falls below 4.4%, the pound could gain some support. However, this also depends on Wednesday’s inflation data. If inflation comes in below expectations, the pound and yields could decline.