The British pound hit a three-week low after BoE Governor Andrew Bailey suggested the central bank could quicken the pace of rate cuts if labor conditions worsen. The currency fell to $1.3467 before recovering slightly.

Bailey described a UK economy with growing slack and higher employer taxes. His strong signal for further rate cuts from 4.25% has influenced investor expectations, especially after four consecutive reductions.

GDP contractions in April and May and a KPMG report showing the steepest hiring drop in two years have deepened concerns.

Markets now price in an 85% chance of an August cut, as the government faces challenges with persistent inflation and declining living standards.