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London - The pound advanced versus most of its 16 major peers before a report analysts said will show the UK’s economic expansion accelerated in the fourth quarter.
Sterling’s gain versus the euro pared a decline on Wednesday which was the biggest in almost two weeks. Britain’s economy grew 0.5% in the final three months of 2015, from 0.4% in the third quarter, according to the median forecast of analysts surveyed by Bloomberg.
Even so, sterling slumped to an almost seven-year low against the dollar last week, weighed down by whipsawing financial markets and concern the UK will vote to exit the European Union.
The outlook for interest rates remains muted too, with Bank of England Governor Mark Carney telling lawmakers in London on January 26 that “we will have to see the renewal of growth above trend, we’ll have to see unit labor costs pick up, and we’ll have to see a continued firming of core inflation” before tightening policy.
Forward contracts based on the sterling overnight index average, or Sonia, show traders aren’t fully pricing in a quarter-point increase to the BoE’s 0.5% official bank rate until after March 2017.
The pound gained 0.2% to 76.35 pence per euro as of 08:36, having weakened 1% on Wednesday, its steepest decline since January 15. Sterling rose 0.1% to $1.4247 after falling to $1.4080 on January 21, the lowest since March 2009.
