Sterling slipped to a five-week low on Thursday as investors grew wary about the outlook for the British currency before a central bank meeting next month and the dollar consolidated gains after a sharp rally this week.
The British currency edged 0.1 per cent lower at $1.3915, taking its losses so far this month to more than half a per cent.
While the magnitude of the losses are not big, sterling’s weakness in April is a concern because historically it has proved to be a strong seasonal factor for the currency.
“After the hat-trick of disappointing numbers last week and a more dovish sounding Bank of England, a weaker than forecast first quarter GDP on Friday would put to bed any remaining optimism of a May rate hike,” said Fiona Cincotta, senior market analyst at City Index.
The release will be the last key data issued before the Bank of England’s Monetary Policy Committee meeting early next month, and markets are split over whether the central bank will raise interest rates after the central bank chief dampened expectations of a hike.
Governor Mark Carney dented confidence that a rate hike would happen when he said last week that Britain's economic data was "mixed" and that there were several other MPC meetings later this year.
Market expectations for a rate hike have slipped back to a more uncertain 50 per cent from an almost certain 80 per cent a couple of weeks ago, according to swap markets.
Against the euro, which some analysts say is currently a better gauge of demand for pounds given there has been considerable dollar-specific news this week, sterling weakened 0.2 per cent to 87.45 pence per euro.
The dollar settled at 2-1/2 month highs against the Japanese yen on Thursday as a rise in benchmark 10-year US Treasury yields above the 3 per cent line this week rattled currency bears. – Reuters
