Sterling edged lower 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. The Office for National Statistics said that the economy grew by 4.8% in the second quarter. Sterling was little changed and slipped 0.2% versus the dollar at $1.3835 by 1526 GMT after rising in the previous session. This interrupted a 3-day losing streak versus the greenback.
The pound traded just off 18-month highs touched and was 0.2% lower on the day. This is by changing hands at 84.83 pence. ING analysts said that 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. He also added that it is quite likely that the pace of growth has already peaked. In recent weeks, sterling has outperformed. This is because the COVID cases have fallen and high vaccination rates allowed the British government to lift most of the rules.
GBP investors will be looking for direction in forthcoming UK data releases. Jane Foley, head of FX strategy at Rabobank commented that, it is to gauge whether there is risk that the BoE could extend the hawkish element, further in the months ahead. Analysts said that 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.