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Sterling flat versus euro after UK data boost

01/14/2022 | 05:27am EDT
FILE PHOTO: Pound and U.S. dollar banknotes are seen in this illustration

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

Jan 14 (Reuters) - Sterling was barely flat against the euro after rising earlier in the session on robust UK data, while it edged lower against a stronger dollar.

Britain's economy grew by a much stronger-than-expected 0.9% in November, finally taking it above its size just before the country went into its first COVID-19 lockdown.

Despite a potential leadership change in the country after Prime Minister Boris Johnson party scandal, the pound had recently been immune to political noise, being supported by expectations of rate hikes by the Bank of England this year.

The currency's trade-weighted index rose on Thursday to its highest level since June 24 2016, the day after the Brexit referendum vote.

Sterling fell 0.2% to $1.3681 on Friday, within striking distance of its highest level since Oct. 29 touched on Thursday at $1.3749.

The U.S. dollar was on track to snap a 3-day losing streak as a selling spree driven by the view that Fed tightening moves were largely priced-in appeared to abate.

The pound was up 0.01% versus the euro at 83.54 pence, not far from its highest level versus the single currency since February 2020 hit on Tuesday.

UK data "suggests the UK economy might have had a little insulation heading into the Covid-restricted December period," ING analysts said in a note.

"A 25bp BoE rate hike is still priced with an 80% probability for the February 3rd meeting - which will likely keep GBP supported over the coming weeks," they added.

Johnson is facing the gravest crisis of his premiership after revelations about a series of gatherings in Downing Street during COVID-19 lockdowns.

According to Berenberg economist Holger Schmieding, "a conservative successor (of Johnson), for instance, Chancellor Rishi Sunak or Foreign Secretary Lizz Truss, would likely pursue roughly similar policies but in a much less erratic fashion."

"A calmer approach could benefit UK markets and domestic business investment," he said.

But, "to bolster his chances to stay in office, Johnson may be tempted to take a particularly hard line against the European Union, for instance on Northern Ireland or fisheries," he added.

British Prime Minister is facing a revolt by grassroots Conservative supporters who want him to resign.

"If political change does not herald policy change, markets do not care," said Paul Donovan, chief economist at UBS. (Reporting by Stefano Rebaudo; Editing by Emelia Sithole-Matarise and Tomasz Janowski)


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / BRITISH POUND (AUD/GBP) 2.41% 0.6189 Delayed Quote.12.16%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.09% 0.6748 Delayed Quote.5.51%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.42% 0.65023 Delayed Quote.-10.08%
BRITISH POUND / EURO (GBP/EUR) -2.22% 1.0891 Delayed Quote.-5.95%
BRITISH POUND / US DOLLAR (GBP/USD) -2.70% 1.04975 Delayed Quote.-19.80%
CANADIAN DOLLAR / BRITISH POUND (CAD/GBP) 2.41% 0.698641 Delayed Quote.15.94%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.14% 0.761342 Delayed Quote.9.05%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.38% 0.733 Delayed Quote.-7.03%
EURO / BRITISH POUND (EUR/GBP) 2.25% 0.91776 Delayed Quote.6.25%
EURO / US DOLLAR (EUR/USD) -0.52% 0.96346 Delayed Quote.-14.81%
INDIAN RUPEE / BRITISH POUND (INR/GBP) 0.09% 0.011358 Delayed Quote.14.34%
INDIAN RUPEE / EURO (INR/EUR) 0.35% 0.012734 Delayed Quote.7.66%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.26% 0.012308 Delayed Quote.-8.35%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.37% 0.57171 Delayed Quote.-15.97%
US DOLLAR / BRITISH POUND (USD/GBP) 2.79% 0.95229 Delayed Quote.24.69%
US DOLLAR / EURO (USD/EUR) 0.51% 1.037915 Delayed Quote.17.33%
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