Market Update

Sterling slipped to a 16-month low today against the safe-haven U.S. dollar and is heading for its third consecutive weekly decline as stronger-than-expected UK economic growth did little to support the pound.

The Office for National Statistics said Britain’s economy grew 0.8% in January, the strongest monthly expansion since June and more than forecast by any economist in a Reuters poll, which had pointed to growth of 0.2%.

Stronger than expected data from the UK did little to support the pound with the economic outlook appearing increasingly uncertain due to Russia’s invasion of Ukraine.

The pound fell to its lowest level against a strengthening dollar since November 2020. The dollar remains buoyed by expectations of tighter Federal Reserve policy following data on surging inflation released on Thursday.

The broad rise in prices in the United States in February sparked the largest annual increase in inflation in 40 years, supporting expectations that the Federal Reserve will begin raising interest rates when it convenes on March 15.

Against the euro, sterling declined further, after touching a one-month low against the single currency in the previous day. On Monday, the pound hit its highest level against the single currency since 2016.

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