Finance
Pound heads for worst month since 2022 budget crisis
Published by Global Banking and Finance Review
Posted on July 31, 2025
2 min readLast updated: January 22, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on July 31, 2025
2 min readLast updated: January 22, 2026
The pound is heading for its worst monthly loss since 2022, driven by US economic optimism and UK fiscal concerns, with investors losing confidence in the British economy.
By Amanda Cooper
LONDON (Reuters) -The pound headed towards its largest monthly loss against the dollar since September 2022 on Thursday, reflecting growing confidence among investors in the outlook for the U.S. economy and increasing pessimism over the British one.
Sterling was down 0.15% on the day at $1.322 and weakened against the euro, which rose 0.4% to 86.46 pence.
In July, the pound has fallen by 3.7%, the most since losing 3.9% and hitting a record low in September 2022, during then-Prime Minister Liz Truss's budget-induced market crisis.
The pound is still up nearly 6% against the dollar this year, but that's softened dramatically from a year-to-date gain of almost 10% at the start of the month.
Following Wednesday's two-day policy meeting, the Federal Reserve left U.S. interest rates unchanged, as expected, and Chair Jerome Powell gave no indication of when they might fall again.
In the meantime, U.S. data has painted a far rosier picture of the world's largest economy than UK data has of the British economy. U.S. data releases this week including second-quarter economic activity and some measures of employment have added to that.
The Citi U.S. economic surprise index has overtaken its UK counterpart this week for the first time since April.
With the Bank of England expected to almost certainly deliver two more rate cuts this year, according to money markets, and a far lower chance of two more cuts from the Fed, investors are ditching the pound.
Weekly data from the U.S. Commodity Futures Trading Commission shows speculators are neutral on the pound, having whittled back the bullish positioning that had prevailed continuously since February.
"Although not in receipt of any tier-one data releases this week, sterling has still had a bumpy ride," analysts at Monex said in a note.
"Slowing U.S. growth and UK fiscal concerns both point to sterling underperformance moving forward. As such, we see little room for sterling to rally sustainably from current levels sub-$1.33," they said.
(Reporting by Amanda CooperEditing by Frances Kerry)
The pound is currently down 0.15% at $1.322, heading towards its largest monthly loss since September 2022.
In July, the pound has fallen by 3.7%, marking its most significant decline since the budget crisis in September 2022.
The Bank of England is expected to deliver two more rate cuts this year, contrasting with a lower chance of similar cuts from the Federal Reserve.
Recent U.S. data has shown a more positive outlook for the economy compared to the UK, with the Citi U.S. economic surprise index surpassing its UK counterpart.
Analysts suggest that both slowing U.S. growth and UK fiscal concerns indicate that sterling may underperform moving forward, with little room for a sustainable rally.
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