BRUSSELS (dpa-AFX) - The British pound weakened against most major currencies in the European session on Tuesday, as traders speculate that the Bank of England (BoE) is likely to cut its interest rate in this year end.
At the BoE's next meeting on August 7, the markets are now generally pricing in a 25-basis point rate drop, which would bring the Bank Rate down from its current level of 4.25 percent to 4.00 percent.
European shares traded lower as investors reacted to the latest tariff updates and look forward to earnings from several big-name companies this week, including Google parent Alphabet, Tesla, General Motors and Intel.
As U.S. President Donald Trump pushes for higher tariffs, the European Union is said to be readying its counterattack.
EU member states are pushing for new and stringent measures to retaliate against U.S. companies, according to a Wall Street Journal report. EU officials are meeting this week to draw up a plan for reprisals, Bloomberg said.
U.S. Treasury Secretary Scott Bessent on Monday said the Trump administration is 'more concerned with high quality deals than getting these deals done by Aug. 1.'
On the data front, traders await Federal Reserve Chairman Jerome Powell's comments at an event in Washington later today for additional clues about what the U.S. central bank plans to do with interest rates.
Upcoming U.S. jobless claims data and the July business activity report, both due on Thursday, also remain on investors' radar following last week's mixed inflation indicators.
In economic releases, the U.K. budget deficit widened sharply in June, data from the Office for National Statistics showed.
Public sector net borrowing rose by GBP 6.6 billion from the previous year to GBP 20.7 billion in June. This was bigger than the GBP 17.1 billion shortfall forecast by the Office for Budget Responsibility.
In the European trading now, the pound fell to 0.8680 against the euro and 1.3466 against the U.S. dollar, from early highs of 0.8667 and 1.3490, respectively. If the pound extends its downtrend, it is likely to find support around 0.88 against the euro and 1.33 against the greenback.
Against the Swiss franc, the pound edged down to 1.0742 from an early high of 1.0774. On the downside, 1.06 is seen as the next support level for the pound.
Meanwhile, the pound rose to 199.29 against the yen, from an early low of 198.74. The pound may test resistance around the 200.00 region.
Looking ahead, U.S. Redbook report and U.S. Richmond Fed manufacturing index for July are slated for release in the New York session.
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