Sterling hits 6-week low against euro as rate cut bets mount

The British pound strengthened against the US dollar on Thursday but slumped to a six-week low against the euro, as disappointing economic data from both the UK and the US deepened concerns over growth and increased market bets on Bank of England interest rate cuts.

Sterling rose 0.4 per cent to $1.3597, buoyed by dollar weakness, but fell 0.6 per cent to 85.28 pence per euro—its weakest level against the single currency since May 2.

Investors flocked to safe-haven assets, pushing the euro to its strongest level against the US dollar in nearly four years. Meanwhile, concerns lingered over the durability of the recent US-China trade agreement.

UK manufacturing contracted in May, though at a slower pace than initially feared, with firms citing tax hikes and US tariffs as reasons for continued declines in output, orders, and employment.

“The UK economy continues to face challenges,” said Nick Andrews, senior forex strategist at HSBC, noting that recent labour market data and the government’s spending review failed to boost growth expectations.

Markets now fully price in a 25 basis point rate cut by the Bank of England in September and expect 50 bps in cuts by year-end. Analysts at Ebury said a shift away from the BoE’s hawkish stance could pave the way for an August rate reduction.

Attribution: Reuters

Subediting: Y.Yasser