LONDON: Sterling steadied on Thursday as traders who had initially reacted positively to British finance minister George Osborne's latest fiscal statement looked more closely at negative aspects including a cut to longer-term growth forecasts.
While Osborne, in his Autumn Statement on Wednesday, raised growth forecasts for Britain's economy for this year and 2015 and offered tax cuts, he also said the government would miss its budget deficit goals and the Office for Budget Responsibity -- the fiscal watchdog -- lowered its economic growth forecasts for 2016-2018.
Data released on Thursday showed British house price growth slowed again in the three months to November, keeping pressure off the Bank of England to further act to cool down the market.
Sterling was flat at $1.5693, around a cent away from a 15-month low of $1.5585 hit earlier in the week. Against the euro, the pound was also flat at 78.475 pence.
"If the market is convinced that the growth profile for the UK going forward is going to be lower because of further fiscal austerity measures, that's going to take the shine off of sterling," said Ian Stannard, head of European FX strategy at Morgan Stanley.
Stannard said he had revised down his forecast for sterling to $1.45 by the third quarter of 2015, as uncertainty over the outcome of next year's general election and lower growth weigh on the currency. Following a rate hike that Stannard expects in November 2015, the pound would rebound to $1.47.
UK rate forecasts have been pushed back dramatically over the past few months, with some now not expecting a hike until early 2016. That pushback of expectations has helped send sterling down almost 9 percent since it hit a six-year high near $1.72 in July, when many were expecting a 2014 hike.
Later on Thursday, the BoE is expected to keep interest rates unchanged at their historic lows.
"The BoE meeting today will probably be ignored again -- and rightly so," Commerzbank analysts said in a research note. "The BoE ... continues to concentrate on inflation developments and should these continue to disappoint we would not exclude the BoE delaying rate hikes once again -- possibly as far as 2016."
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