The pound netted its first weekly drop since May as indicators showed that U.K.’s economic growth isn’t meeting most of analysts’ projections.’
The sterling depreciated after earlier rising to its highest level in nearly six years versus the U.S. dollar last week after the Citigroup Inc’s gauge of economic performance against analyst expectations touched its weakest level since May 2013. It also fell due to concern that its strength against its counterparts was hurting company profits.
The pound plunged 0.3 percent this week to trade at $1.7116 as of 10 p.m. in London after earlier surging to $1.7180 on July 4, its strongest level since October 2008. The U.K. currency also fell 0.4 percent to trade at 79.51 pence per euro.
“Some of the optimism about the U.K. economic background and some of the forecasts for an early rate hike in the U.K. could prove to be a little bit overdone,” Jane Foley, a London-based senior currency strategist at Rabobank International told Bloomberg. “Sterling will remain a buy on dips but there’s a possibility we will see some more of these dips.”
The pound has appreciated 11 percent over the past 12 months on speculation the Bank of England might be the first big central bank to phase out economic stimulus. The BOE officials retained the U.K. target rate at 0.5 percent, a record-low, during their last meeting on July 10.
The Citigroup Inc’s Economic Surprise Index fell after economic data lagged economists’ projections. This is after manufacturing and construction sector reports as well as home prices data all missed estimates last week. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Yashu Gola at email@example.com