The pound weakened against both the dollar and euro on Monday, as strong US jobs data boosted the greenback, while UK business activity data highlighted persistent inflation.
Sterling dropped 0.5% to $1.2387, driven by traders' expectations of another US rate hike in July, following a strong US jobs report. Meanwhile, input cost pressures for British services firms rose sharply in May, according to activity data released on Monday.
The pound also weakened against the euro, which rose 0.35% to 86.31 pence, after hitting a low of 85.68 pence last week. Some analysts suggest that rate hikes could weigh on the pound, while others argue that they would enhance the currency's carry advantage and provide support.
