The pound is falling, but Britain remains calm

Bank of England Governor Andrew Bailey, speaking on July 15, 2025, at Mansion House (the annual dinner for bankers and business leaders), focused on three key themes — and none were about problems in the UK economy.

Everything was much more routine:

• Global imbalance in the world economy

He talked about the threat to stability while the US, China, the EU, and others pursue private gains over collective benefit. He criticized US tariff policy as a "generational shift" that, under the guise of protecting the domestic market, destroys all positive aspects of the economy.

• The role of the IMF and international cooperation

Bailey urged the IMF to step up monitoring of imbalances, referring to the unimplemented 2006 "Multilateral Consultation Mechanism" aimed at coordinating financial policies among leading countries. He especially called for IMF cooperation with the WTO to enhance oversight of global trade flows.

• Domestic deficits

Bailey believes that the fundamental causes of imbalances are not tariffs but domestic deficits: US budget debates and China’s suppression of domestic consumption. He warned that countries with large deficits could face financial conflict—even if they hold reserve currencies (yuan, dollar).

One noteworthy announcement: the BOE will launch an upgraded retail payments system to reduce reliance on Visa/Mastercard and integrate new digital formats (CBDCs, stablecoins, etc.).

Slowing employment, GDP contraction, and fiscal issues continue to weigh on the pound and UK bond yields. Bailey directly highlighted the possibility of "gradual and cautious" rate cuts if the labor market weakens. This has increased expectations for two cuts by December (from 4.25% to ~3.6%).

Before the speech, the pound had stabilized around $1.3435—but that was as good as it got. We do not recommend new GBP/USD positions for now; if you must trade, safer opportunities lie in EUR/GBP or GBP/JPY.

So we act wisely and avoid unnecessary risks.

Profits to y’all!