The pound fell against major currencies on Monday as traders increasingly bet that the Bank of England will cut interest rates in March to support the slowing UK economy.
Sterling dropped to $1.225 against the US dollar, its lowest level in two weeks, and slipped to €1.11 versus the euro. Market participants cited weak economic data, including sluggish retail sales and a rise in unemployment, as factors raising expectations of a looser monetary policy.
Analysts suggest that the Bank of England could reduce the base rate by 0.25 percentage points, with some economists predicting a larger cut if inflation continues to fall while economic growth remains subdued.
“Markets are pricing in a March cut as the Bank balances the need to stimulate growth with its commitment to keep inflation under control,” said Mark Austin, a senior economist at Investec. “The pound is adjusting to these expectations.”
UK economic indicators have painted a mixed picture. Consumer spending has slowed, and the job market shows early signs of weakening, while inflation has eased slightly from recent highs.
Traders will be closely watching the Bank’s policy announcement in March, which could set the tone for sterling’s performance in the coming months.
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