Investing.com - The pound was steady on Monday morning, despite the International Monetary Fund downgrading the UK’s growth forecast for 2017 at the weekend.
Sterling edged above the $1.30 level against the US dollar again on Monday morning. At 11:15 BST, GBP/USD was up 0.31% at 1.3034.
The UK economy is projected to grow 1.7% in 2017, down from the forecast of 2.0% in April. According to the IMF, weaker-than-expected growth in the first quarter of 2017 sparked the revised projection.
A drop in the pound’s value since last year’s Brexit referendum, higher inflation, and lower real wage growth have added to a weaker outlook for the economy. As such, the UK Treasury called for a smoother Brexit on the back of the IMF’s downgrade.
A soft-Brexit is seen as favourable to the market. Chancellor Philip Hammond has indicated that a transition period for the UK’s exit from the European Union would be a business-friendly option, rather than the ‘no deal is better than a bad deal’ hard-Brexit rhetoric.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 93.75, not far from its 13-month low of 93.65. The dollar has been beleaguered by domestic issues.
The Trump administration has been dogged by claims that Russian interference in the election campaign extended into Trump’s business. The administration took another hit on Friday when the White House spokesman Sean Spicer resigned his post.
This came following a tough week for the Republican President. The failure to pass healthcare reform through Republican-dominated Congress is dampening hopes for Trump’s plan to overhaul the tax code and implement fiscal stimulus.
The euro took a hit on Monday following the release of services and manufacturing PMI data for the euro-zone, France and Germany. Although Germany and the euro-zone are growing, the rate of growth for June was slower than forecast.
EUR/GBP was down 0.36% at 0.8942. The euro was steady against the weakened dollar.
The pound performed well against the commodity-heavy New Zealand and Canadian dollars. GBP/CAD was up 0.28% at 1.6345, and GBP/NZD jumped half a percentage point to 1.7519. It fared worse against the Aussie, GBP/AUD was down 0.10% at 1.6404.
The Japanese yen was strong on Monday, GBP/JPY was 0.12% lower against the safe haven JPY at 144.27. However, GBP/CHF was up 0.21% at 1.315.
Investors will be keeping a close eye on the stock markets this week as earning season is in full swing. The FTSE enjoyed highs last week compared to its European counterparts. However, the FTSE 100 was down on Monday.
UK GDP for Q2 will be released on Wednesday and will be watched to see if the economy has picked up following a weak Q1.