UK Economy Shrinks Again, Pound Falls Amid Rate Cut Odds

The UK economy has contracted for the second consecutive month, shrinking by 0.1% in May after a 0.3% decline in April, primarily due to weakness in industrial and construction output. This economic downturn has led to a slump in the pound, which fell against the US dollar and euro, while traders increasingly expect the Bank of England to cut interest rates in August to support growth. Finance Minister Rachel Reeves faces pressure to raise taxes amid these challenges, as recent welfare spending failed to stabilize public finances. The economic uncertainty is further compounded by US President Donald Trump's imposition of a 35% tariff on Canadian imports and threats of higher tariffs on other trading partners, heightening global trade tensions. UK stock markets have reacted with declines in sectors like personal goods, while investors seek refuge in safe-haven assets such as precious metals. These intertwined domestic economic struggles and international trade disputes are creating a precarious environment for UK financial and market stability.