Sterling's Slide Sparks Economic Anxiety

Sterling experienced a dip on Friday, reaching a two-week low, following data that indicated the UK economy contracted for a second consecutive month. This added pressure on the Bank of England to potentially lower borrowing costs in the near future.

The UK economy saw a 0.1% contraction, as reported by the Office for National Statistics, dragged down by lackluster performances in industrial and construction sectors. Economist James Smith from ING highlighted concerns emanating from the labor market, questioning its stability as growth falters.

The pound dropped by 0.26% against the U.S. dollar and 0.2% against the euro. Meanwhile, traders now see a 78.3% likelihood of a rate cut by the BoE, up from 64% earlier predictions. This economic strain coincides with political challenges, including potential tax increases to offset fiscal imbalances and heightened trade tensions globally.

(With inputs from agencies.)