The British pound is trading near one-month lows around $1.30 as market sentiment is impacted by both international trade uncertainties and concerning domestic economic data. Initial optimism regarding US-China trade relations has waned, and newly released UK economic figures point to potential weaknesses.
- The British pound hovered around $1.30, near one-month lows.
- Initial optimism over a 90-day reduction in US-China tariffs faded.
- The UK unemployment rate rose to 4.5%, a 2021 high, and in line with expectations.
- Businesses cut jobs for a third consecutive month.
- Wage growth slowed but remained above 3%.
- Market expectations for additional rate cuts by the Bank of England slightly increased.
- The Bank of England lowered borrowing costs by 25bps last week, but the decision was not unanimous.
These factors suggest a weakening economic outlook for the UK. The combination of fading trade deal hopes and rising domestic unemployment are creating headwinds for the currency. Slowing wage growth, while still above the inflation target threshold, further contributes to concerns about the overall health of the British economy. The Bank of England’s recent rate cut and the possibility of further easing indicate that policymakers are also concerned about these trends and are prepared to take action to stimulate the economy, which could further weigh on the currency.