Yahoo Finance UK's Pedro Goncalves writes:
The pound slipped to a three-week low on Monday after Bank of England governor Andrew Bailey signalled the central bank could make more substantial interest rate cuts if the labour market weakens further.
Sterling fell 0.2% to $1.3467 in morning trading, its lowest level since 23 June, as investors digested Bailey’s remarks that “slack” was beginning to open up in the UK economy. The pound was flat against the euro at €1.1541.
Bailey told The Times: “I really do believe the path is downward” for interest rates.
Bank rate is currently 4.25%, following four quarter-point cuts in the last year, with the Bank next scheduled to set rates on 7 August.
Bailey added: “If we saw the slack opening up much more quickly, that would lead us to a different conclusion.
“I think the path [for interest rates] is down. I really do believe the path is downward but we continue to use the words ‘gradual and careful’ because … some people say to me, ‘Why are you cutting when inflation’s above target?”
Bailey’s comments come amid increasing market speculation that slowing wage growth and moderating inflation could give the central bank scope to accelerate its easing cycle.
The US dollar index (DX-Y.NYB), which tracks the greenback’s value against six major currencies, was muted at 97.88 at the time of writing.
In other currency moves, the pound was flat against the euro, trading at €1.1541 at the time of writing.
