Sterling falls to lowest level this year against the dollar
By Abigail Townsend
Date: Thursday 11 Nov 2021
(Sharecast News) - Sterling has fallen to its lowest level against the dollar this year, weighed down by weaker-than-expected economic growth figures.
Data from the Office for National Statistics published on Thursday showed UK GDP had grown by 1.3% between July and September. That was significantly lower than the 5.5% seen in the second quarter, and below analyst expectations for 1.5%.
The slowing growth, caused primarily by ongoing global supply chain issues, weighed on markets, and sterling was trading at 1.3398 against the dollar as at 1130 GMT.
The pound has been under increased pressure since last week, when the Bank of England unexpectedly failed to raise interest rates, despite rising inflation.
Meanwhile, data in the US showed inflation had soared to a 30-year high, fuelling expectations that the Federal Reserve will increase the cost of borrowing, which has pushed the dollar higher.
Victoria Scholar, head of investment at Interactive Investor, said: "The UK's growth figures are adding to selling pressure on the pound, which has slumped to session lows, extending yesterday's sharp drop against the US dollar as its downward trendline continues.
"GBP-USD has broken below support at $1.34, falling to levels not seen since last December. The pound has been trading in a descending trendline since the highs in May, retracing around a third of its gains since the pandemic-induced trough in March 2020."
Chris Beauchamp, chief market analyst at IG, said: "A mixed bag of UK data heaped insult upon injury for sterling. US inflation is piling pressure on the Fed, but the hangover from last weeks' BoE decision, when they shied at the rate hike fence, has the pound without much support in the wider FX market.
"Today might offer some brief respite for sterling, given the lack of US data, but it is likely to only be a short pause."
Neil Wilson, chief market analyst at Markets.com, said: "The dollar has rallied aggressively in the wake of the inflation report. The mood seems to be that the Fed will move first [though] do not discount the BoE just yet. December remains 'live' [for a potential rate rise], even if we cannot believe anything [governor Andrew] Bailey says now.
"Another factor in the mix: there is a level of Brexit headline premium attached the pound right now that we maybe haven't really contended with for some time. Threats are flying around but so far, no action to destabilise the pound."
Special promo:
Trading the Forex Market? Visit FXmania.com to get advanced infomation about currencies and the Foreign Exchange
Market.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN