Sterling tanks as UK growth disappoints

Sterling tanked on Friday as disappointing UK growth figures forced investors to question the likelihood of a Bank of England interest rate hike next month.

Sterling fell as much as 1.1 per cent against the US dollar in the wake of the data, which showed gross domestic product (GDP) grew by just 0.1 per cent – much worse than economists’ predictions for a slowdown to 0.3 per cent and down from 0.4 per cent in the fourth quarter of 2017.

It was also the weakest quarterly growth since the fourth quarter of 2012.

By Friday afternoon, sterling was trading down 0.9 per cent at £1.378 on the dollar, and slumped 0.9 per cent versus the euro to £1.138.

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Lifting incomes

Separately, US private sector pay grew at the quickest pace since before the recovery started, adding to evidence that steady economic growth and falling unemployment are finally lifting incomes and potentially inflation.

Official figures showed a 2.9 per cent growth in private sector wages and salaries in the first three months of the year compared with the same period a year earlier, the fastest pace since 2008, according to the Bureau of Labor Statistics.

The figures came as the US economy continued to grow above its trend rate in the first quarter, albeit at a slower pace than in the final quarter of 2017. – PA, Copyright The Financial Times Limited 2018