LONDON (Reuters) – Sterling steadied just above $1.30 on Tuesday, unable to break out against a broadly weaker dollar as worries over Brexit and the pace of UK economic growth swirl.
The pound recovered from its worst week against the euro in nine months on Monday as investors took profit on gains for the single currency and ministers talked up a transitional deal to smooth Britain’s exit from the European Union.
But a cut in the IMF’s growth forecast for this year for the world’s fifth biggest economy underlined the risk that Britain will struggle in the years ahead as a housing price boom stalls and companies shift operations to mainland Europe.
The pound inched down 0.1 percent in early deals in London to trade at $1.3016, around a cent off 10-month highs hit a week ago as the greenback weakened globally. It fell almost 0.2 percent to 89.44 pence per euro.
“Overall the Cable (dollar) rate has struggled to sustain rallies above $1.3000, weighed down by recent softer UK inflation readings and ongoing worry over the outlook,” said LMAX Exchange analyst Joel Kruger.
“Still, while broad based dollar selling persists, any setbacks in the UK currency should be able to find decent support.”
The trends survey from business lobby CBI is due later on Tuesday, to be followed on Wednesday by the first estimate of second quarter gross domestic product.
A speech by Bank of England chief economist Andy Haldane at 1700 GMT will also be closely watched at the end of the UK business day.
The flip by Haldane, previously a strong supporter of loose monetary policy, to back a rise in interest rates later this year, was one of the triggers for a rise in UK short-term forward interest rates – a support for the pound.
But that move has already been questioned by a batch of lower inflation numbers and some bearish output figures that suggest the economy is ill-prepared for tighter monetary conditions.