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UPDATE 1-Sterling little moved by GDP pick-up as Brexit concerns weigh

Reuters | Updated: 10-05-2019 14:56 IST | Created: 10-05-2019 14:56 IST
UPDATE 1-Sterling little moved by GDP pick-up as Brexit concerns weigh
The British pound was little changed on Friday even after data showed the UK economy got a boost ahead of a Brexit that never came, with traders doubtful Prime Minister Theresa May can reach a deal with the opposition on how to leave the European Union. Britain's economy grew at a quarterly rate of 0.5% in the first quarter of 2019, in line with the reading expected by the Bank of England, as well as by private-sector economists in a Reuters poll.

Business surveys have shown manufacturers built up stocks of goods in case the country left the UK without a transition deal at the end of March. Year-on-year GDP growth picked up to 1.8% in early 2019 from 1.4% in the last three months of 2018, Britain's Office for National Statistics said on Friday. This was its highest since the third quarter of 2017 and again in line with economists' forecasts.

Momentum in the British economy has been stymied by uncertainty related to how and when Britain will leave the EU, with business investment suffering. But the economy has also proven resilient, with British consumers continuing to spend and manufacturers rushing to deliver orders before the initial Brexit deadline of March 29. The government delayed the Brexit date until end of October as it continues talks with the opposition Labour Party to agree a deal that can muster sufficient support from lawmakers that have repeatedly rejected May's withdrawal agreement.

Sterling was little moved on Friday at $1.3003 while against the euro it dropped 0.1% to 86.36 pence . "Given the prospect of GDP correcting lower in 2Q19, we doubt the market will want to significantly re-price BoE (Bank of England) tightening (8 basis points of hikes priced over the next year) despite hawkish protestations from the BoE," ING analysts said in a note sent to clients.

Sterling on Thursday dropped to $1.2967, its weakest in May, pushed lower by media reports that the talks between May's ruling Conservative Party and Labour had run into the sand. (Reporting by Tommy Wilkes; Editing by Toby Chopra)


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