50% Off! Beat the market in 2025 with InvestingProCLAIM SALE

Sterling breaks three-day losing streak after UK GDP beats forecasts

Published 11/08/2023, 07:14
Updated 11/08/2023, 10:05
© Reuters. FILE PHOTO: Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger/File Photo
GBP/USD
-
EUR/GBP
-

LONDON (Reuters) -The pound broke three straight days of losses on Friday after data showed the British economy grew more than expected in June, which boosted sterling slightly against the dollar and the euro.

British economic output grew by 0.5% in June, figures from the Office for National Statistics showed on Friday, above expectations in a Reuters poll of economists which had forecast growth of 0.2%.

Britain, however, remains the only big advanced economy yet to regain its pre-COVID, late-2019 level.

The stronger than expected showing helped to justify bets that the Bank of England will keep on raising interest rates, given the central bank stressed this month that resilience in the economy was one of the factors that would underpin its judgement.

Sterling was last up 0.24% against the dollar at $1.2707, a touch higher than before the data and outperforming other G10 currencies, but was still on course for a fourth consecutive weekly loss.

The euro fell against the pound, dropping 0.1% on the day to 86.50 pence.

"The data was very strong, there is no other way to put it. I think the relatively muted (market) reaction is maybe because the markets are taking the scale of outperformance in manufacturing activity in June as a one off," said Derek Halpenny, head of research global markets EMEA at MUFG.

The data showed that in the second quarter the manufacturing sector had its best quarter since early 2019, excluding the initial rebound from the first COVID-19 lockdown in 2020.

Attention now turns to the next batch of UK numbers due next week - inflation data as well as wages and jobs.

© Reuters. FILE PHOTO: Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger/File Photo

"Now if there's even a slight upward bias in the print next week relative to expectations that will obviously confirm more tightening to come," said Halpenny.

Current market pricing roughly indicates expectations of two more Bank of England rate rises in this cycle. In comparison, the Federal Reserve, and potentially also the European Central Bank, are seen as having finished raising rates.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.