Spark Global Limited reports：
Sterling fell to its lowest level against the dollar of 2021 on Thursday as the UK economy appeared to be losing momentum, the dollar was boosted by a surge in US inflation and bets the Federal Reserve would raise interest rates faster than expected.
Figures released by the Office for National Statistics showed that the UK economy grew by 0.6% in September, but estimates for previous months were revised down, leaving the economy still smaller than it was in February 2020.
At its November policy meeting, the Bank of England left its main interest rate unchanged at 0.1%, having previously hinted at a possible rise.
Markets are now pricing in a high probability of a December rate hike, but uncertainty remains high.
James Smith, markets economist at ING, said he thought the slowdown in UK economic momentum was unlikely to have a major impact on bank of England policymakers, for whom a recovery in the Labour market was a priority.
“Rate hikes in December and February are highly unlikely, though we think they are more likely — especially if the jobs data brings good news to the committee,” he said in a note to clients.
Tighter monetary policy would help boost the pound, economists say.
“Expectations of and eventual rate rises should allow sterling to recover its recent losses,” said Dean Turner, economist at UBS Global Wealth Management.
The pound fell 0.24% to $1.3365 on Thursday, its lowest level since December 2020.
Currency derivatives markets are pricing in further sterling weakness, with the cost of options to protect against further falls reaching their highest level since the 2016 Brexit vote.
Sterling fell 0.1 per cent to 85.66p against the euro.
Also unnerving investors is the post-Brexit dispute between the UK and the EU over trade with Northern Ireland.
Britain’s Brexit secretary, David Frost, said on Wednesday that Brussels should remain calm and avoid “massive and disproportionate retaliation” if London follows through on its threat to trigger emergency unilateral clauses in the brexit deal.
Reprint indicated source：Spark Global Limited information