Britain's pound inches up, but growth fears dominate

Thursday,   19-May-2022   03:21 PM (IST)

Britain’s pound inched up against the dollar on Thursday, but stayed clear of recent two-week highs as soaring inflation combined with a murky growth outlook prevented a stronger rebound. At 0850 GMT, sterling was up 0.4% at $1.2395. However, the currency stayed off highs of $1.25 seen earlier this week, having tumbled on Wednesday after data showed UK inflation rising to a 40-year record and concerns flared about a sharp economic slowdown given the pain inflicted on consumers. An easing in the safe-haven dollar aided the pound’s recovery, with the market awaiting British April retail sales data on Friday for fresh direction. Strong labour market data earlier this week had boosted expectations that the Bank of England would have to further increase interest rates, while other data showed that inflation is now running at 9% -- well above the BoE’s 2% target. Against the euro, the pound struggled for direction and was little changed at around 84.76 pence. Potential changes to the Northern Ireland protocol and the risk of a trade war with the European Union also pose a Brexit-related risk for sterling, analysts said.