Sterling falls as data shows Britain's economic growth stutters

[LONDON] Sterling fell on Monday (Apr 11) 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 per cent in February, down from 0.8 per cent growth in January. A Reuters poll of economists had forecast a 0.3 per cent increase.

The pound edged 0.1 per cent to US$1.3025 at 0840 GMT, after briefly falling below US$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 142.6 basis points by the Bank of England by year-end.

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 US$1.30 if the Bank of England is able to hike 50 bps after at least one of its next policy announcements (that is, in May or June)".

Versus a strengthening euro, sterling fell 0.4 per cent to 83.75 pence, after rising on Friday to its highest level against the single currency since Mar 23.

The euro gained support after the first round of France's presidential election showed incumbent Emmanuel Macron beat far right challenger Marine Le Pen.

REUTERS