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London - The pound advanced for a second day versus the dollar as investors looked past the International Monetary Fund’s (IMF) decision to downgrade the UK’s growth forecast for this year and focused their attention on the developments surrounding Brexit and the Bank of England’s monetary policy.
Sterling gained versus most of its Group-of-10 peers, approaching its highest level against the US currency since September.
The IMF revised down its 2017 growth forecast for the UK to 1.7% from 1.8% in 2016, it said in an update of its World Economic Outlook, after predicting an increase to 2% in April. Britain’s growth performance contrasted with many of its European peers such as Germany, France and Spain where growth surpassed expectations, the IMF said.
READ: IMF cuts UK forecast after disappointing growth data
The report came before the UK’s Office for National Statistics releases its second-quarter growth data on Wednesday.
• GBP/USD climbed 0.3% to $1.3033 as of 12:35, having touched $1.3126 on July 18, the highest since September 16.
• “Markets are probably just assuming or hoping that the move towards more of a transitional-led Brexit process, which will remove the cliff-edge fear, has also just added to a little bit of impetuous,” said Jeremy Stretch, head of G-10 FX Strategy at Canadian Imperial Bank of Commerce, “Now at least it seems as though markets are ignoring the IMF growth downgrades.”
• Traders await GDP data due on Wednesday with economists forecasting a reading of 0.3% for 2Q, up from 0.2% in the first three months of 2017.
• British Trade Secretary Liam Fox is in Washington to meet his US counterpart as the UK looks for a trans-Atlantic trade deal soon after Brexit Benchmark 10-year gilt yields were little changed at 1.17%.
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