Pound hits three-week low as Bank of England governor hints at interest rate cut
Sterling fell 0.2% to $1.3467 in morning trading, its lowest level since 23 June, as investors digested Bailey's remarks that "slack" was beginning to open up in the UK economy. The pound was flat against the euro at €1.1541.
Bailey told The Times: 'I really do believe the path is downward' for interest rates.
Bank rate is currently 4.25%, following four quarter-point cuts in the last year, with the Bank next scheduled to set rates on 7 August.
Bailey added: 'If we saw the slack opening up much more quickly, that would lead us to a different conclusion.
'I think the path [for interest rates] is down. I really do believe the path is downward but we continue to use the words 'gradual and careful' because … some people say to me, 'Why are you cutting when inflation's above target?'"
Read more: FTSE 100 LIVE: FTSE up and European markets dip amid fresh Trump tariff threats
Bailey's comments come amid increasing market speculation that slowing wage growth and moderating inflation could give the central bank scope to accelerate its easing cycle.
The US dollar index (DX-Y.NYB), which tracks the greenback's value against six major currencies, was muted at 97.88 at the time of writing.
In other currency moves, the pound was flat against the euro, trading at €1.1541 at the time of writing.
Oil prices edged higher on Monday, building on gains of more than 2% from the previous session, as traders weighed the prospect of further US sanctions on Russia against signs of increased Saudi production and renewed global trade tensions.
Brent crude (BZ=F) climbed 0.8% to trade at $70.92 a barrel, while West Texas Intermediate (CL=F) gained a bit over 1% to $69.21.
Prices found support from signs that Washington may tighten pressure on Moscow over its war in Ukraine. US president Donald Trump on Sunday pledged to send Patriot air defence systems to Ukraine, amid intensifying Russian bombardment of urban areas. He is expected to make a 'major statement' on Russia on Monday.
Trump has grown increasingly frustrated with Russian president Vladimir Putin over the lack of progress in peace talks and the continuing escalation of attacks on Ukrainian cities.
Read more: Chinese EVs take off in the UK as BYD closes in on Tesla
A bipartisan bill in Congress aimed at imposing further sanctions on Russia gained traction last week but has yet to secure Trump's full backing. The measure is seen as an attempt to bring Moscow to the negotiating table in good faith.
However, gains in oil were capped by reports of increased output from Saudi Arabia, the world's largest crude exporter, as well as fresh trade concerns sparked by the US president's comments over the weekend.
Trump raised the possibility of new tariffs on the European Union and Mexico, reviving worries over a potential flare-up in global trade disputes. These developments injected uncertainty into the demand outlook for crude.
Meanwhile, speculation that the Federal Reserve may ease monetary policy added further support to oil prices. Expectations of lower interest rates have weighed on the US dollar, making commodities priced in the currency more attractive and potentially lifting demand.
Gold prices climbed on Monday, supported by renewed safe-haven demand after Trump threatened to impose sweeping new tariffs on imports from the European Union and Mexico, reigniting fears of escalating global trade tensions.
Gold (GC=F) futures were 0.6% higher at $3,382.70 an ounce, while spot gold gained 0.4% to $3.372.24 per ounce after touching a three-week high of 3,385.90 earlier in the session.
"We are seeing safe-haven demand coming back into the picture due to this uncertainty on the implementation of U.S. global trade tariffs policy," OANDA senior market analyst Kelvin Wong said.
"Near-term outlook looks positive for gold and if gold prices are able to have a daily close above $3,360, it could potentially advance higher towards the next resistance level at $3,435."
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The gains came after Trump on Saturday said the US would impose a 30% tariff on imports from Mexico and the EU starting 1 August, following weeks of stalled negotiations with both trading partners. The announcement marked a sharp escalation in trade rhetoric, raising concerns over global economic growth and stoking investor appetite for safe-haven assets.
In response, officials from both the EU and Mexico criticised the proposed tariffs as unfair and disruptive. Brussels said it would maintain its suspension of retaliatory measures until early August, in a bid to keep diplomatic channels open and pursue a negotiated solution.
In equities, the FTSE 100 (^FTSE) ticked higher, up 0.2% to 8,959.61 points. For more details follow our live coverage here.Sign in to access your portfolio
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