British Pound Erases Earlier Losses After Hawkish BoE Remarks

The British pound erased some of the losses it had against the euro and the US dollar in the wake of disappointing economic growth data on Friday. The UK currency was supported by hawkish comments that were made by policymakers from the Bank of England during a conference earlier today.

In a report that was published today, the UK Office for National Statistics stated that the nation’s gross domestic product increased 1.5% in the second quarter of 2017 from a year earlier. This marked the slowest economic growth since the first quarter of 2013.

The reported rate today is the second estimate from the statistical office after it reported 1.7% rate in its last estimate. Investors expected the second estimate to reflect the same growth that was reported in the first.

Gains in the services sector were offset by slower growth in household spending. On the other hand, business investment grew, while UK international deficit remained unchanged. Despite a slower yearly rate for economic growth, the second quarter maintained the 0.3% increase in gross domestic product that was previously reported.

The British currency dropped following the report, but comments from Bank of England Governor Mark Carney gave it some support. Speaking at a conference that marked the twentieth anniversary for the central bank’s autonomy in choosing interest rates, Carney said that the UK economy appears on track for an interest rate hike.

Carney’s comments echoed the position of policymakers within the central bank. Carney said that upward inflation pressures shifted the stance of policymakers, who now believe that an interest rate increase in the coming months will likely be needed.

GBP/USD traded at 1.3399 as of 16:05 GMT on Friday after dropping to 1.3351 14:15 GMT, the lowest level today. GBP/USD began trading today at 1.3425. EUR/GBP was at 0.8811 after rising to 0.8838 at 14:15 GMT, a level last seen on September 22. EUR/GBP started the day at 0.8773.

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