LONDON, July 14 — Sterling fell towards the US$1.25 (RM5.34) mark today and reached a two-week low against the euro after new data showed Britain’s economy was recovering more slowly than forecast.
Gross domestic product rose by 1.8 per cent in May after falling by a record 20.8 per cent in April, the Office for National Statistics said, well below forecasts in a Reuters poll.
“You saw sterling moving lower almost immediately after the announcement and it was a big disappointment and I think that it’s also the realisation that maybe the V-shaped recovery doesn’t apply to the UK to the same extent,” said Morten Lund, an analyst at Nordea.
Adding to fears was a warning from authorities that another, more deadly Covid-19 wave could kill up to 120,000 Britons over the winter.
The pound fell 0.33 per cent to US$1.2510 versus the dollar and traded 0.4 per cent lower against the euro at 90.77 pence.
Consumer data also indicated a tentative recovery. The British Retail Consortium said retail sales values rose by 3.4 per cent in annual terms in June, and Barclaycard said overall consumer spending fell 14.5 per cent in annual terms in June, the smallest decline since lockdown began
Money markets price in the Bank of England’s cutting rates below 0 per cent only next March. But government two-year bond yields plumbed a record low around minus 0.13 per cent and 10-year yields slipped 2.5 basis points to 0.16 per cent.
FTSE mid-cap shares, which tend to be mostly domestically oriented, fell 1.3 per cent versus a 0.3 per cent decline for the exporter-laden FTSE100.
Investors are also waiting for more news on Britain’s negotiations with the European Union on concluding a trade deal for the post-Brexit period. Britain left the bloc on January 31, with a one-year transition period to iron out a future relationship.
“My feeling is the market is not fully pricing in the likelihood of a hard Brexit,” said Colin Asher at Mizuho. “There has been very little progress on negotiations and even if there is a deal, there’s not much time to put a lot in it.” — Reuters
