By Joice Alves
LONDON (Reuters) – 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 0.1% to $1.3025 at 0840 GMT, after briefly 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 142.6 basis points by the Bank of England by year-end.
Rising U.S. 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. [FRX/]
Stephen Gallo, European Head of FX Strategy at BMO Capital Markets, said “given the speed at which the Fed is normalizing, 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 a strengthening euro, sterling fell 0.4% to 83.75 pence, after rising on Friday to its highest level against the single currency since March 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.
(Reporting by Joice Alves, editing by Ed Osmond)
