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Sterling edges lower after record GDP fails to impress

Fri, 11th Jun 2021 09:48

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Joice Alves

LONDON, June 11 (Reuters) - The pound edged lower and was on
course for its worst week versus the euro, with analysts saying
data showing Britain's recovery from the COVID-19 pandemic sped
up in April was slightly disappointing.

Britain's GDP was a record 27.6% higher than a year earlier
when the virus was rampant. But economic output remained 3.7%
below its level in February 2020, before the pandemic led to
lockdown measures.

Sterling fell 0.1% to 85.97 pence at 0830 GMT and was on
course for its worst week versus the single currency since late
April.

Versus the dollar, it was also down 0.1% to $1.4154, after
falling to a one-month low of $1.4071 on Thursday.

"UK GDP data release this morning, while strong, did not
quite meet market expectations. Also, reports that the
re-opening of the economy could be delayed beyond June 21 should
limit enthusiasm for GBP versus the euro," said Jane Foley, Head
of FX Strategy at Rabobank.

Prime Minister Boris Johnson wants to fully lift lockdown
restrictions in England on June 21, helped by a swift vaccine
roll-out that has brightened Britain's economic outlook.

But with the Delta variant of COVID-19 first detected in
India spreading fast, Johnson has said the lifting of lockdown
could be delayed.

Sterling was under pressure this week after Britain and the
European Union failed to agree on solutions to post-Brexit trade
problems in Northern Ireland.

It won back a little ground on Thursday as investors
expected the Federal Reserve to keep its policy unchanged even
after data showed U.S. consumer prices climbed; while the
European Central Bank maintained an elevated flow of stimulus as
expected.

Sterling has also found some support from U.S. President Joe
Biden's key messages to Britain in his first meeting with
Johnson, Rabobank's Foley also said.

They "were more about the special relationship between the
U.S. and the UK and less about issues related to the N. Ireland
protocol," she said.

Biden and Johnson met in Cornwall, southwest England, before
the start of the G7 Summit on Friday.
(Reporting by Joice Alves; Editing by Giles Elgood)

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