Sterling remains near its weekly low as the UK economy fails to grow in the third quarter

LONDON, Nov 10 (Reuters) – Sterling remained at around a one-week low against the dollar on Friday, expecting a weekly decline of 1.2% as markets digested data showing the British economy did not grow in the third quarter had grown, although this was slightly above expectations.

The pound was last up slightly on the day at $1.2231, little changed from before the GDP data was released.

Those figures showed a 0% change in gross domestic product in the July-September period, while a Reuters poll of economists forecast a 0.1% decline, which many analysts said would likely mark the start of a recession.

“The extent of outperformance is unlikely to trigger a major change in market pricing (for the interest rate outlook),” MUFG analysts said in a morning note.

“The market is likely to consolidate next week when we have key CPI data.”

Changes in expectations about when and how quickly various central banks will begin cutting interest rates next year are a major factor in currency markets at the moment.

Markets are currently pricing in rate cuts by the Bank of England of around 40 basis points by September, less than for the US Federal Reserve or the European Central Bank.

BoE chief economist Huw Pill drew attention on Monday by saying that pricing, which currently points to a first rate cut in August 2024, “doesn’t seem entirely unreasonable, at least to me.”

Those comments – unusual since most central bank policymakers avoid talking about interest rate cuts – helped the pound fall 1.2% against the dollar this week.

Pill said on Thursday it was essential to keep interest rates at their current levels to curb inflation.

A rise in the greenback was also a major factor in moves in the sterling/dollar pair – known as cable – and the dollar rose on Thursday after Federal Reserve officials, including Fed Chair Jerome Powell, said they were still not sure if the interest rates were high enough.

The story goes on

But the British currency has also fallen against the euro, which gained 0.7% against the pound this week, its biggest weekly gain since mid-September.

The European common currency was last at 87.32 pence on Friday, barely changing against the pound.

(Reporting by Alun John; Editing by Andrew Heavens)