Sterling on the back foot as recession risk rattles rate bets
Sterling slid against dollar and euro Wednesday as unexpected GDP contraction in October raised recession fears, prompting markets to trim Bank of England rate hike bets.
The pound fell against the dollar and euro on Wednesday after data showed the UK economy unexpectedly shrank 0.3% in October. Sterling dropped to $1.2521 and €0.8609 amid concerns the increased recession risk could impact Bank of England policy.
Markets are now pricing in a 20% chance of a rate cut by March 2024 following the downbeat GDP figures. Earlier this week, weaker-than-expected UK wage growth data had already raised doubts about further tightening.
Fewer than three Monetary Policy Committee members are now expected to vote in favour of a rate hike when the BoE meets on Thursday. Economists had forecast that October GDP would remain flat.
The pound sinking to its lowest level against the euro (EUR/GBP) since Dec. 1 also weighed on sterling. The GDP contraction raises the prospect of a UK recession this winter.
