The British pound tumbled to its lowest levels against the dollar in nearly three months and against the euro in over two years, as mounting anticipation of a rate cut by the Bank of England by year-end drove the currency through critical support levels. Sterling lost 0.5% against the dollar, marking its weakest point since August 1.
In the meantime, the euro climbed 0.34% to 88.10 pence, its highest since May 2023. This rise was underpinned by diminished food inflation and reports suggesting an increased budget deficit for the UK’s finance minister. Goldman Sachs analysts pointed out that breaching the 88 pence barrier introduced a ‘technical element’ to the movement, coupled with signs of cooling inflation in Britain.
Goldman economists revised their expectations, now forecasting a 25 basis point cut in the Bank of England’s next meeting. While markets only attribute a 40% probability to a near-term rate reduction, there is a 70% chance projected for a cut in November or December, particularly after recent soft inflation data.
(With inputs from agencies.)
