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Sterling Little Changed by Britain’s 4.8% GDP Growth in Q2

By:
Reuters

LONDON (Reuters) - Sterling edged lower on Thursday as analysts expected the Bank of England to make no imminent moves in its monetary policy after official data showed Britain's economy grew in line with expectations in the second quarter.

A bank employee counts pound notes at Kasikornbank in Bangkok

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The Office for National Statistics said the economy grew by 4.8% in the second quarter, in line with a Reuters poll of economists’ quarter-on-quarter expectations.

After the data was released, sterling was little changed and slipped 0.2% versus the dollar at $1.3835 after rising in the previous session, interrupting a 3-day losing streak versus the greenback.

Versus the euro, the pound traded just off 18-month highs touched on Tuesday and was 0.2% lower on the day, changing hands at 84.83 pence.

ING analysts said it was unlikely that the GDP data would “move the needle on the BoE story”.

Stuart Cole, head macro economist at Equiti Capital in London, said that “for sterling, while the economic landscape continues to provide solid support, it does suggest further topside progress will be slow.

“It is quite likely that the pace of growth has already peaked,” he added.

In recent weeks, sterling has outperformed as COVID-19 cases have fallen and high vaccination rates allowed the British government to lift most social-distancing rules.

GBP investors will be looking for direction in forthcoming UK data releases to gauge whether there is risk that the BoE could extend the hawkish element, seen last week, further in the months ahead, said Jane Foley, head of FX strategy at Rabobank.

Analysts said the BoE tone was slightly hawkish last week, when its monetary policy committee voted 7-1 to maintain the pace of its government bond-buying. But they said that “some modest tightening” of monetary policy over the BoE’s three-year forecast period was likely to be necessary.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Joice Alves; Editing by Giles Elgood and Mark Heinrich)

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