Pound Struggles Amid UK's Fiscal Woes

The British pound made modest gains against both the dollar and the euro on Monday, yet continued to hover near the multi-week lows it reached last week. This comes as investors concentrate on the Bank of England's policies and the UK's shaky fiscal landscape.

Recent data has painted a mixed picture for Britain's economy. While the labor market appears to be cooling, consumer price inflation has surged unexpectedly. Financial markets have largely priced in a quarter-point rate cut for the upcoming August 7 Bank of England meeting.

Adding to the pound's woes is growing fiscal risk, compounded by the government's struggle with welfare reforms. This may lead to potential tax increases to adhere to fiscal rules, amid weak growth projections. Meanwhile, consumer confidence has plummeted, signaling further economic challenges ahead.

(With inputs from agencies.)