The pound began the week on the back foot, losing ground on Monday (1 August) against both the dollar and the euro ahead of the Bank of England's (BoE) meeting later this week, during which the bank is widely expected to announce a cut to interest rates.

Britain's economy has struggled amid the volatility triggered by the Brexit vote in June, while a series of economic survey has shown the trend has been compounded by the BoE's surprising decision to sit tight two weeks ago.

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Data released on Monday (1 August) showed Britain's manufacturing sector suffered the biggest slowdown in over three years in July, while surveys published last week highlighted the service sector experienced the sharpest contraction since 2009.

Following the manufacturing figures, the pound was 0.40% lower against the dollar and fell 0.23% against the euro, exchanging hands at $1.3176 and €1.1811 respectively.

Analysts remain convinced Threadneedle Street officials will implement economic stimulus to prevent the UK economy from slipping into recession.

"It looks increasingly likely we'll get some form of pre-emptive stimulus − as any Brexit ills won't be confirmed by the hard data until October − from the BoE on Thursday, but the question remains as to what that will be," said Augustin Eden, analyst at Accendo Markets.

"A straight interest rate cut is perhaps the worst idea but there are other options in the form of quantitative easing and the Funding for Lending Scheme. Whatever happens though, the pound could well be set to weaken again versus the euro and the dollar this week."

Elsewhere, the euro slid against the dollar and the greenback also gained ground against the yen, rising 0.33% to ¥102.40. However, the Bloomberg Dollar Spot Index, which gauges the dollar against a basket of foreign currencies, recorded its biggest drop since April after falling 1.7%.

The decline came as investors now expect the Federal Reserve to hold out until September 2017 before rising interest rates, after data released last week showed the US economy in the second quarter expanded at less than half the rate economists had forecast.

"It's hard to be bullish of the dollar," said Kit Juckes, global head of FX strategy at Societe Generale.

"The GDP data will go a long way towards keeping the Fed inactive through the presidential elections."

Bank of England