Sterling moves in a negative zone before monthly growth data

The British pound retreated in European markets on Thursday against a basket of global currencies, moving into negative territory against the US dollar amid a rise in the American currency ahead of the release of key US labor market data.

With the likelihood of a Bank of England interest rate cut next February remaining weak, investors are later awaiting the release of the UK’s monthly economic growth data, along with additional figures on British factory output.

Price Overview

• British pound exchange rate today: The pound declined against the dollar by 0.15% to $1.3423, from the session opening level of $1.3443, recording a high of $1.3446.

• The pound rose by about 0.2% against the dollar on Wednesday, marking its second gain in the past three days, supported by recovery buying from a three-week low at $1.3391.

The US Dollar

The dollar index rose by 0.15% on Thursday, resuming gains that were temporarily halted the previous day and moving closer to a four-week high, reflecting the rise of the US currency against a basket of major and secondary currencies.

This advance comes as the probability of the Federal Reserve cutting US interest rates in January declines. To reprice these expectations, investors are later awaiting the release of weekly US jobless claims data.

UK Interest Rates

• Pricing for the probability of the Bank of England cutting UK interest rates by about 25 basis points at the February meeting remains steady below 20%.

• To reprice these expectations, investors are later awaiting the release of key UK economic data, including economic growth figures for last November and additional data on British factory output.

Outlook for the British Pound

Here at Economies.com, we expect that if UK economic data come in less positive than markets anticipate, the probability of a UK interest rate cut next February will rise, leading to further downside pressure on the British pound.