Sterling Slide: Economic Challenges Weigh on British Pound

The British pound weakened against the dollar as Federal Reserve Chair Jerome Powell hinted at limited rate cuts, boosting the U.S. currency. Sterling fell 0.35%, trading at $1.34795. The euro strengthened against the pound, fueled by UK economic uncertainty and limited likelihood of immediate rate cuts by the Bank of England.

The British pound took a hit against the dollar on Wednesday, following Federal Reserve Chair Jerome Powell's cautious remarks about potential rate cuts, providing a boost to the U.S. currency.

Sterling, which has already seen a 1% decline over the past week, dropped further to $1.34795, down 0.35%. Despite steadiness against the euro at 87.31 pence, the euro reached its strongest levels against the pound in nearly two months, showcasing a notable 5.5% gain this year. A weak outlook off UK business activity survey results recently compounded concerns for the pound amid slowing momentum in the manufacturing and service sectors.

With persistent price pressures gripping the UK economy, the likelihood of Bank of England rate cuts seems slim until March, hindering any economic stimulus efforts. BoE's chief economist, Huw Pill, expressed tempered optimism regarding inflation outlooks compared to earlier this year. BoE member Megan Greene is expected to address supply shocks and monetary policy, though major shifts in rate expectations hinge largely on forthcoming data rather than central bank commentary.

(With inputs from agencies.)