Pound's Roller Coaster: Currency's Struggle Amid EU-U.S. Trade Deal

The British pound hit a two-year low against the euro amidst volatility fueled by an EU-U.S. trade deal. As investors speculated on trade impacts, the pound also dipped against the dollar. Analysts are divided on the future of sterling, with rate cuts by the Bank of England being a focal point.

The British pound experienced a tumultuous day, plummeting to a two-year low against the euro before rebounding, driven by the announcement of an EU-U.S. trade deal. Investors reacted swiftly with the pound falling 0.2% against the dollar, marking its lowest in a week amid weak British retail sales and business activity data.

The euro initially surged to 87.69 pence in Asian trading, only to reverse as speculations over U.S. trade deals buoyed the dollar, curbing the euro's gains. Despite divisions among investors on sterling's stability, there's concern over potential rate cuts by the Bank of England affecting the currency.

With sticky inflation in Britain, policymakers are hesitant to cut rates swiftly. Analysts suggest the pound's current weakness is excessive and predict a correction aligned with interest rate disparities. Economic data is scarce this week, but an upcoming BoE meeting is expected to solidify a 25 basis point rate cut.

(With inputs from agencies.)