By Lucy Raitano
LONDON, March 31 - Sterling eased versus the
dollar on Friday as a murky economic outlook overshadowed data
showing Britain's economy avoided a recession in the final
months of 2022.
Despite meagre trading on Friday, the pound remains on track
for its biggest monthly gain in four months of 3%, and a 2.4%
quarterly gain.
"The pound is set to be the best-performing currency of the
first quarter of 2023, having gained 2.5% against the dollar",
wrote Francesco Pesole, FX strategist at ING in a note.
"Along with the improvement in the economic outlook,
sterling is definitely drawing benefits from the market’s
conviction that the Bank of England will need to continue
raising rates."
Data on Friday showed gross domestic product (GDP) increased
by 0.1% between October and December after a preliminary
estimate of no growth. Household finances were boosted by state
energy bill subsidies but investment by businesses fell.
British house prices also slid in March at the fastest
annual rate since the financial crisis, mortgage lender
Nationwide said on Friday.
High inflation and worries about weak growth are still
weighing on the pound, which was down 0.10% at $1.23740 by 1124
GMT. The pound meanwhile ticked up slightly against
the euro to 87.97 pence.
Data last week showed British inflation unexpectedly rose to
10.4% - over five times the Bank of England's target rate of 2%
and the highest among the Group of Seven rich nations.
Even so, the pound is set to end the month 3% higher against
the dollar, erasing February's 2.4% drop.
The BoE raised interest rates last week for the 11th time in
a row. Markets are pricing in a 60% chance of a further 25 bp
hike from the central bank in May, and a 40% chance of no change .
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Graphic: World FX rates in 2023 Graphic: Trade-weighted sterling since Brexit vote ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Lucy Raitano; Editing by Kirsten Donovan)
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