GBP trades lower vs USD and EUR – BBH

FXStreet Insights Team FXStreet

Pound Sterling (GBP) is down versus US Dollar (USD) and Euro (EUR). UK economic activity unexpectedly shrinks in January, BBH FX analysts report.

BOE is expected to pause easing at its March 20 meeting

"Real GDP fell -0.1% m/m (consensus: 0.1%) vs. 0.4% in December driven by a -0.9% m/m contraction in the production sector and a -0.2% m/m decline in construction output. The service sector grew 0.1% m/m vs. 0.4% in December. Real GDP is on track to undershoot the Bank of England’s (BOE) Q1 projection of 0.4% q/q."

"Still, the BOE is expected to pause easing at its March 20 meeting in part because services inflation remains high at 5% y/y. Over the next 12 months, the swaps market is pricing in 50bps of cuts and small odds of an additional 25bps cut. Bottom line: the UK’s near-term stagflation backdrop can continue to weigh on GBP against EUR."

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FXStreet Insights Team

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