The pound lost ground on Tuesday (26 July), after a senior Bank of England's policymaker said he changed his mind over the prospects for further stimulus from a week ago when he urged the bank to adopt a more cautious stance.

Speaking earlier today, Martin Weale, who will leave the Monetary Policy Commitee next month, said he was in favour of implementing stimulus measures after data released last week showed Britain's economy was shrinking at a faster rate than during the recession seven years ago.

Following Weale's comments, the pound slipped 0.08% against the dollar and 0.11% against the euro, exchanging hands at $1.3125 and €1.1935 respectively by mid-afternoon.

Connor Campbell, financial analyst at Spreadex, warned the UK currency could experience further volatility in the lead up to the next Bank of England meeting on 4 August.

"The pound can likely expect a few more sessions like this in the coming week and a bit, with analysts now 90% sure that the Bank of England will pull the rate cut trigger next Thursday," he said.

Elsewhere, the yen recorded its biggest gain against the dollar since Britain voted to leave the European Union last month, as the greenback tumbled 1.45% to ¥104.36. However, while currencies tend to strengthen on the back of positive economic data, the surge was attributed to increasing pessimism over the flagging Japanese economy.

"An imminent shift from fiscal tightening to loosening has reduced the pressure on the Bank of Japan to provide more stimulus," said Marcel Thieliant, analyst at Capital Economics.

"However, the sharp appreciation of the exchange rate since the start of the year is threatening to derail the Bank's efforts to lift price pressures, and we expect policymakers to step up the pace of asset purchases and probably also cut the interest rate on excess reserves at the upcoming meeting."

Meanwhile, the euro slipped 0.07% against the dollar, trading at $1.098