Sterling extends losses on UK interest rate prospects

Sterling fell in European trade on Wednesday against a basket of major rivals, extending losses for the third straight session against the dollar away from eight-month highs on active profit-taking, while traders analyze UK interest rate prospects. 

Recent UK wages data showed reduced inflationary pressures and thus bolstered the case for a UK interest rate cut in June.

Losses are diminished by data that showed the UK economy returned to growth in January after slipping into contraction in previous months. 

GBP/USD

GBP/USD fell 0.15% to 1.2776, with a session-high at 1.2799, after closing down 0.2% on Tuesday, the second loss in a row on profit-taking off an eight-month high at 1.2894.

The pound was hurt by UK wages and labor data, which once again bolstered the case for an early UK interest rate cut in June. 

Official UK data showed average wages rose 5.6% in January, down from 5.8% in December, which could indicate a slowing inflation arc.

Growth 

UK data also showed GDP growth at 0.2% m/m in January as expected, after a 0.1% contraction in December. 

Deutsche Bank’s analysts said in a memo that the UK economy has turned the corner and is now likely to head for successive growth rates throughout the year.