Pound plunges after Bank boss suggests rate-cutting could be 'more aggressive'

Andrew Bailey said that if inflation remains in check the Bank might be able to be “more activist” over reducing borrowing costs

The pound took a nosedive to its worst day in over a year following suggestions from the Bank of England governor that "more aggressive" interest rate cuts could be on. the way.

Andrew Bailey raised the possibility that the Bank might become "more activist" in slashing borrowing costs, should inflation stay under control, in an interview with The Guardian. This triggered predictions from economists about impending rate cuts, sending sterling plummeting amid unexpected sluggishness in the UK services sector.

Sterling fell 1.13% against the US dollar to $1.312 and slid 0.82% against the euro to €1.190. Analyst Kathleen Brooks, who is the research director at XTB stated, "The market has used Bailey’s comments as a green light to price in more monetary loosening."

She added: "Pound versus the dollar had already sold off sharply this week, so further downside could be limited in the short term, however, Bailey has made it harder for the pound to recover." Despite gains from robust oil stocks like Shell and BP thanks to soaring crude prices, London's stock markets closed marginally down. The FTSE 100 ended just 8.34 points or 0.1% lower, closing at 8,282.52.

Across the Channel, European indexes also sank, with France’s Cac 40 down 1.32% and Germany’s Dax dropping by 0.78%. Over in the US, the main markets had a weak start to trading, especially among tech companies. The price of oil has soared to its highest in over a month as traders reacted to increased instability in the Middle East, offsetting potential gains from an improved global supply outlook.

Brent crude oil saw a 3.9% increase to 76.83 dollars as markets were closing in London. Tesco shares rose after the UK’s largest supermarket group informed shareholders that its full-year profit is set be slightly higher than previous guidance due to stronger sales.

The retailer reported that consumers are in "reasonably good shape" as a surge in demand for premium products and food price cuts helped lift sales 4% higher for the past half year. Tesco shares were up 2.6% to 364p at the end of trading.

Construction firm Galliford Try also saw a rise in value after it surpassed profit and sales guidance in a delayed annual results update. The Uxbridge-based company expressed confidence in its future outlook as it highlighted a "strong pipeline" of new opportunities across its sectors. Shares in the firm moved 8.3% higher to 325p as a result.

However, SSP Group ended in the red as weaker-than-expected trading in continental Europe overshadowed a rise in group sales. The Upper Crust and Caffe Ritazza owner reported 6% sales growth for the latest quarter, but saw growth of 3% in continental Europe as French sales were "negatively impacted" by the Paris Olympics.

SSP shares were down 0.8% at 155.9p. The FTSE 100's biggest climbers were Rolls-Royce, rising 14.6p to 533.4p, Tesco, increasing by 9.1p to 364p, Shell, up 43p to 2,564p, Scottish Mortgage Investment Trust, climbing 14p to 856p, and JD Sports, up 2.1p to 142.45p. On the other hand, the largest fallers were Phoenix Group, dropping 32p to 523.5p, Diploma, down 226p to 4,208p, M&G, falling 5.2p to 202.4p, Hargreaves Lansdown, down 27p to 1,085p, and Prudential, decreasing 17.2p to 703.2p.