UPDATE 2-Sterling shrugs off weaker-than-expected UK GDP, higher U.S. inflation

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*Graphic: World FX Rates in 2021 tmsnrt.rs/2egbfVh

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*Graphic: trade-weighted sterling since the Brexit vote tmsnrt.rs/2hwV9Hv (update rates, leads and headlines)

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LONDON, Oct 13 (Businesshala) – Sterling rose higher on Wednesday as traders shrugged off data showing weaker-than-expected economic growth in Britain and a rise in US consumer prices, and focused on bets that the Bank of England Will raise interest rates.

The Office for National Statistics said the UK economy grew 0.4% in August, just 0.8% smaller than in February 2020. Economists polled by Businesshala had forecast a 0.5% increase in monthly GDP for August.

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ING told clients in a note this week that economic data, including UK jobs figures for September, which largely came in line with forecasts, “are prompting markets to reduce their aggressive pricing for the Bank of England”. No reason given”.

Sterling briefly fell below $1.36 against the dollar after data showed a solid September rise in U.S. consumer prices and moves ahead amid a rise in the cost of energy products, the Federal Reserve views. But raising doubts that the high inflation was temporary.

But at 1505 GMT, the pound was up 0.4% at $1.3642, not far from a two-week high on Monday.

The BoE, which is facing a surge in inflation, is set to become the first major central bank to raise interest rates since the start of the pandemic. Investors are betting on a gain of 0.15% by December.

Over the weekend, BoE Governor Andrew Bailey stressed the need to prevent inflation from becoming permanently embedded, and fellow policymaker Michael Saunders said households should be prepared for interest rate hikes “quite early”.

But some analysts have pointed out that sterling has failed to react to new post-Brexit disputes over the Northern Irish Protocol, which regulates trade in the province.

“I think Brexit and trade should be a bigger issue than the GBP,” said Marshall Gittler, head of investment research at BDSwiss Holding.

Additionally, French government spokesman Gabriel Attal said that France was working on a retaliation with Britain in the post-Brexit fishing dispute.

Against the euro, sterling flattened at 84.89 pence, but it was not far from a two-month high on Monday. (Reporting by Joyce Alves Editing by Kirsten Donovan and Bernadette Baum)

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