Sterling unmoved by strong Q2 GDP growth, as inflation fears bite

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*Graphic: trade-weighted sterling since the Brexit vote tmsnrt.rs/2hwV9Hv

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LONDON, Sep 30 (Businesshala) – Sterling held steady near a nine-month low on Thursday amid concerns about British economic growth, as inflation is expected to rise as the country grapples with the fuel crisis.

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Sterling was one of the strongest G10 currencies this year as investors bet that the British economy will recover from the pandemic faster thanks to Britain’s rapid vaccination programme. But that narrative has been broken with sterling eroding all of its strong 2021 gains, down nearly eight cents since its June peak.

Figures showing GDP rose 5.5% in the second quarter, higher than before, much to please sterling investors.

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The pound was flat at $1.3431 against the dollar as of 0845 GMT, not far from a nine-month low on the previous day. Versus the euro, the pound flattened on Wednesday at 86.36 pence near a two-month low.

“GBP is probably overestimating the deepening energy and fuel crisis,” UniCredit analysts said in a note. “We expect the GBP to recover on the prospects of higher rates at home, but that is unlikely to happen easily in the very near term.”

Gas station pumps dried up in British cities this week, with vendors rationing sales as a shortage of truck drivers strained supply chains.

Bank of England Governor Andrew Bailey said on Wednesday he expects the UK economy to recover its pre-pandemic output levels early next year, a little later than the central bank predicted last month. Was.

ING’s Chris Turner, Global Head of Markets, said: “This seems contrary to some speculation that the BoE could rise in early November.”

People in the UK have become more pessimistic about the economy amid increasing pressure on the household budget from rising energy prices and widespread inflation, according to an opinion poll by Kantar Public.

British home prices rose 0.1% in August to September, data from mortgage lender Nationwide showed.

The swap linked to the five-year, five-year forward inflation – a proxy for inflation expectations over the next five years – rose to 3.905% on Tuesday, the highest since the daily record published by Refinitiv in 2013, and to 3.878%. Up Monday. (Reporting by Joyce Alves, Editing by William McLean)

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