The British pound declined in European trading on Wednesday against a basket of major currencies, deepening losses for the third consecutive session against the US dollar and hitting a one-week low. The drop came amid continued strength in the greenback ahead of the annual Jackson Hole Economic Symposium.

Expectations for a September rate cut by the Bank of England have eased following the central bank’s latest policy meeting and a run of strong UK economic data. Investors are now awaiting the release of July inflation figures later today to reassess the outlook.

Price Overview

• The pound fell more than 0.2% against the dollar to $1.3462, its lowest level since August 12, from an opening price of $1.3492, after touching a session high at $1.3493.

• On Tuesday, the pound lost 0.1% against the dollar in a second straight daily decline, driven by renewed demand for the US currency as a safe-haven asset.

US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a third consecutive session to hit a one-week high of 98.44, reflecting persistent strength in the US currency against a basket of majors and minors. Markets remain focused on Fed Chair Jerome Powell’s speech at Jackson Hole on Friday, which could shape expectations for a potential rate cut next month.

UK Interest Rates

• Following last week’s hawkish Bank of England meeting, traders pared back bets on rate cuts, now pricing in an additional 17 basis points of easing this year.

• Current pricing for a 25-basis-point cut at the September meeting stands below 20%.

UK Inflation Data

Later today, investors await key UK inflation readings for July, which are expected to heavily influence the Bank of England’s policy path. The headline CPI is forecast to rise 3.7% year-on-year, slightly up from 3.6% in June, while core CPI is expected to remain steady at 3.7%.

Outlook for the Pound

We at Economies.com expect that if UK inflation prints above market forecasts, expectations for a September BoE rate cut will diminish, supporting a recovery in the pound.

The New Zealand dollar fell broadly in Asian markets on Wednesday against a basket of major and minor currencies, extending losses for the second consecutive day against its US counterpart and hitting a four-month low. The decline came amid accelerating open-market selling following the release of the Reserve Bank of New Zealand’s monetary policy decision.

The RBNZ cut interest rates by 25 basis points to 3.0%, the lowest level since August 2022, and signaled further easing if inflationary pressures continue to decline in line with its forecasts.

When deciding on the 25-basis-point cut, in line with most market expectations, the RBNZ Board also considered a larger 50-basis-point reduction.

Price Overview

• The New Zealand dollar fell against the US dollar by around 1.25% to 0.5820, its lowest level since April 14, down from the opening price of 0.5893, after recording a high of 0.5899 earlier in the session.

• On Tuesday, the New Zealand dollar ended trading down by about 0.5% against the US dollar, its first loss in three days, as the greenback strengthened against most major and minor currencies.

Reserve Bank of New Zealand

As expected, the RBNZ cut its benchmark interest rate by 25 basis points to 3.00% on Wednesday, the lowest since August 2022. This marked the seventh rate cut since the start of the easing cycle a year ago.

The RBNZ has now lowered rates by a total of 250 basis points since August 2024, citing slowing inflation within its medium-term 2–3% target, weakening economic activity, and a softer labor market.

Today’s decision was approved by a majority of the Monetary Policy Committee, with four members voting for the 25-basis-point cut and two voting for a bolder 50-basis-point reduction.

The central bank said that if inflation continues to decline as expected over the medium term, the committee foresees additional rate cuts.

It also noted both upside and downside risks to the outlook. Cautious behavior by households and businesses could weigh further on growth, while the economy might recover more quickly as the full effects of rate cuts take hold.

New Zealand Interest Rates

• Following the RBNZ meeting, markets priced in more than a 50% chance of a 25-basis-point cut at the October 8 meeting, and above 95% for November.

• Futures markets now suggest New Zealand rates could fall to 2.5% by year-end.

• Stephen Toplis, Head of Research at Bank of New Zealand, said that given the dovish tone of the statement, the bank now expects 25-basis-point cuts in both October and November.

The Reserve Bank of New Zealand announced its interest rate decision on Wednesday morning at the conclusion of its August 20 meeting, cutting the benchmark rate by 25 basis points to a range of 3.00%, the lowest level since August 2022. The move was in line with market expectations and marked the seventh rate cut since the start of the monetary easing cycle in August 2024.

The RBNZ stated that further cuts are likely if medium-term inflationary pressures continue to ease in line with the bank’s forecasts.

Ethereum fell sharply on Tuesday alongside a broad sell-off in digital assets, driven by investor withdrawals from several US-based cryptocurrency funds.

US spot Ethereum ETFs recorded outflows worth $197 million on Monday, the second-largest daily redemption on record. The sell-off coincided with record-high ETH unstaking requests, with pending withdrawals reaching $3.9 billion. Timothy Messer, head of research at BRN, said both factors “are weighing on market sentiment in the near term.”

He added in a note to investors that the $4,400 level now represents a critical support for the world’s second-largest cryptocurrency. According to CoinGecko, Ethereum is currently trading at $4,203.84, little changed from the previous day.

The outflows follow Ethereum’s failure to reach a new all-time high above its November 2021 peak of $4,891.70, after gains stalled at $4,776.32 on Thursday, August 14.

Analysts say the moves reflect profit-taking after Ethereum rose 66% over the past year, attracting broad institutional interest. Data shows that Ethereum funds hold about 5.08% of total supply, and Messer expects this share could soon exceed the 6.38% held by Bitcoin funds “if inflows continue at the current pace.”

Bitcoin funds also faced pressure, with Monday outflows totaling $122 million. While Bitcoin retreated from last Thursday’s record $124,457.12, Messer noted that “whales” continue accumulating, adding 20,061 BTC to wallets holding 10,000 coins or more over the past six days.

The declines came amid high-profile political developments, as President Donald Trump hosted European leaders at the White House to discuss the Ukraine war following an inconclusive summit with Russian President Vladimir Putin. Messer wrote that “crypto markets remain sensitive to such signals,” adding that the prospect of further talks could boost risk appetite.

He pointed to structural support for Bitcoin at $115,000, saying a breakout above $121,000 could pave the way for a retest of the $123,000–127,000 zone.

He concluded: “Geopolitical developments around US-Ukraine-Russia talks add two-way risks: a ceasefire could push Bitcoin above $120,000, while escalation would warrant caution. A defensive stance and selective buying remain the most prudent strategy.”

Ethereum 

On the trading front, Ethereum declined by 5.7% to $4,124 on CoinMarketCap as of 20:13 GMT.