LONDON: Sterling fell on Monday against the euro and the dollar after data showed the UK economy slowed more sharply than expected in February.
Monthly gross domestic product rose by 0.1% in February, down from 0.8% growth in January. A Reuters poll of economists had forecast a 0.3% increase.
The pound edged flattened to $1.3036 by 1435 GMT, after falling below $1.30, remaining not far from its lowest level against the dollar since November 2020.
“Sterling initially drifted lower in the wake of the data miss,” said Jeremy Stretch, head of G10 FX strategy at CIBC. “We remain mindful of rate expectations remaining excessive.” Money markets are currently pricing around 140 basis points by the Bank of England by year-end.
Analysts will watch jobs and inflation data for Britain due this week, which could invigorate some of the market expectations for BoE hikes.
Rising US yields have kept the dollar near its highest level since May 2020, as the Federal Reserve readies to cut its asset holdings and move interest rates sharply higher.
Stephen Gallo, European head of FX strategy at BMO Capital Markets, said “given the speed at which the Fed is normalising, our view is that cable has a better chance of holding above $1.30 if the BoE is able to hike 50 bps after at least one of its next policy announcements (i.e. May or June)”.
Versus the euro, sterling fell 0.15% to 83.54 pence, after rising on Friday to its highest level against the single currency since March 23.
Comments
Comments are closed.