The British pound experienced a slight increase on Thursday, albeit remaining in close proximity to the lowest levels it has reached against the dollar in the past month. This development occurred as markets regained a sense of stability following an extremely volatile start to the week.

As of the most recent update, the pound sterling exhibited a 0.1% increase, reaching $1.27025. However, it is still on track for a fourth consecutive weekly decline, having experienced a decline of nearly 1% thus far this week. This marks the longest stretch of weekly losses for the pound in almost a year.

Concurrently, the euro, which attained its highest value against the pound since late April on Thursday, demonstrated a 0.1% increase, reaching 86.15 pence.

The Bank of England’s recent decision to reduce interest rates had a negative impact on the value of the pound sterling.

Subsequently, concerns regarding a potential economic downturn in the United States, among other factors, have triggered a decline in risk-based assets, resulting in a decrease in the value of sterling alongside other global markets.

However, on Thursday, the dollar component of the currency pair experienced increased pressure.

Traders are currently anticipating a full percentage point reduction in Federal Reserve interest rates this year, compared to approximately 45 basis points for the Bank of England, which theoretically provides the pound with an advantage.

The British pound has only depreciated by approximately 0.2% this year, making it the best performing major currency against the US dollar. In comparison, the euro, the second best performing currency, has declined by 1%, while the Norwegian crown, the worst performing currency, has depreciated by 6.4%.

However, with the Bank of England now in a rate-cutting cycle and risk appetite appearing fragile, sterling may face challenges in achieving further progress, according to Chris Beauchamp, a market strategist at IG.

"After being knocked back from its gains yesterday, the price has moved higher," he said.

Although a higher low remains a potential outcome, it will require more than a single day of gains. Sterling has been unable to achieve this over the past month, with intraday rallies failing to extend into subsequent sessions. Until this pattern changes, the sellers maintain control.