Published: 08/08/2025 By ECAP
Sluggish Data
The British Pound rose after the Bank of England cut interest rates by 25-basis points during yesterday’s meeting. Despite the cut, a narrow 5-4 vote and upgraded inflation forecasts signalled a hawkish tone, dampening expectations for further cuts. The close vote and cautious guidance supported the Pound, lifting GBP against both the Euro and US Dollar amid concerns over persistent inflation risks.
The Euro came under pressure after German industrial production fell 1.9% in June, significantly worse than expected and marking the third straight month of contraction. In fact, concerns over Germany’s economic health weighed on the common currency. However, optimism around possible Ukraine-Russia peace talks provided some support, as markets reacted positively to the potential for reduced geopolitical tensions, which could bolster the Euro in the near term.
The U.S. Dollar softened as expectations grew for a Federal Reserve rate cut in September, with markets now pricing in over 60-basis points of easing this year. In fact, weaker labour data and a sluggish services sector fuelled speculation of a slowing economy. Moreover, trade tensions and uncertainty over future Fed leadership, especially talk of dovish candidates, added further pressure, pushing the Dollar Index lower.
Data supplied by GC Partners