Pound Falls as FTSE 100 Slides Alongside European Markets

London, July 1, 2025  The British pound weakened on Tuesday, while the FTSE 100 closed sharply lower, mirroring widespread losses across European stock markets. Investors grew cautious amid signs of a global economic slowdown and uncertainty over future interest rate decisions.

Sterling dropped 0.4% against the U.S. dollar, trading at $1.2585 by the afternoon. The FTSE 100, the UK’s main stock index, fell 1.2%, marking one of its biggest one-day losses in recent weeks. Similar declines were seen across Europe, with Germany’s DAX down 1.1% and France’s CAC 40 dropping 1.3%.

The downturn followed weaker-than-expected economic data from China and the Eurozone, which raised concerns about slowing demand for exports and raw materials. This especially impacted UK-listed mining and energy companies, such as Rio Tinto and Glencore, both of which fell nearly 3%.

Banking stocks also declined. Barclays and Lloyds dropped more than 2%, as worries about household debt and high interest rates resurfaced.

“This is a clear sign that investors are becoming more risk-averse,” said Emily Carr, UK strategist at Halifax Markets. “Concerns about slower growth and limited central bank flexibility are weighing on sentiment.”

The pound’s decline reflects uncertainty around the Bank of England’s next steps. While inflation has come down from last year’s highs, core prices remain above target. As a result, markets have pushed back expectations for any interest rate cuts, now likely delayed until late in the year.

“Sterling is under pressure from both economic and political uncertainty,” said Laura Mensah, an analyst at Nomura. “Investors are still unsure how the Bank of England will balance inflation risks with slowing growth.”

Adding to the uncertainty is the upcoming UK general election. Investors are watching closely for any changes in fiscal or economic policy that could affect markets in the months ahead.

Looking forward, traders are awaiting key U.S. economic reports and comments from European Central Bank officials, which could give more direction. For now, market sentiment remains cautious.

“This may just be the beginning of a more volatile period,” Carr said. “With so many moving parts, both the pound and the FTSE 100 are likely to stay under pressure.”