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The British pound slid to a three-week low after BoE Governor Andrew Bailey hinted at a faster pace of interest rate cuts if employment weakens further. Sterling dropped to $1.3467 before recovering slightly.
Bailey painted a worrying economic picture, citing increased slack and employer tax burdens. His comments reinforced expectations for continued rate reductions from the current 4.25% level, following four quarter-point cuts in the past year.
With GDP contracting in April and May and KPMG reporting the sharpest hiring decline in two years, investor anxiety has grown.
Money markets now see an 85% probability of an August cut, up from 76% a week ago, as the government faces pressure to tackle inflation and falling living standards.