LONDON, Sept 11 (Askume) – Sterling edged higher against the dollar on Wednesday, recovering from early-session losses, but fell against the euro after data showed the UK economy unexpectedly slowed as manufacturing output fell in July.
Data from the Office for National Statistics showed UK economic output did not fall by a quarter in July compared to June .
A Askume survey of economists estimated GDP would rise by a monthly 0.2%.
“We should not be overly concerned about this miss,” analysts at Pier Hunter said in a note. They added that forward-looking business activity surveys remain healthy and highlighted known volatility in monthly data, particularly in heavy industry.
JPMorgan analysts said July’s economic output did not reflect this trend. However, they said risks to GDP growth in the third quarter have weakened.
Sanjay Raja, senior economist at Deutsche Bank, said that after seeing risks to GDP growth rising in the third quarter relative to the bank’s quarter-on-quarter baseline of 0.4%, downside risks to it are now rising.
Sterling rose 0.1% to $1.3093 against the dollar, after falling to $1.3071 earlier in the session.
The dollar fell to its lowest level this year against the yen after investors bet Democrat Kamala Harris would defeat Republican rival Donald Trump in November’s presidential election .
Sterling fell 0.7% against the yen to 185.05 yen, its lowest in a month.
Investors are also awaiting a key US inflation report that could signal how quickly the Federal Reserve will cut interest rates next week.
EUR/GBP rose 0.14% to 84.37 pence.
The Bank of England is expected to keep interest rates unchanged next week, although market traders believe it may cut rates again this year, possibly in November.
In the coming weeks, UK markets will also be focused on the new Labour government’s first budget next month.
UK banks are lobbying against potential tax rises in the upcoming Budget on Oct. 30, senior industry sources told Askume, as they fear it would threaten the industry’s use of tax increases to boost public finance capacity.
