Pound Falls as Optimism Caused by Strong GDP Growth Fades

The Great Britain pound fell against its major rivals (though not against the extremely weak euro) as optimism caused by yesterday’s better-than-expected economic data was replaced by caution ahead of the central bank’s meeting.

Yesterday, a report of Britain’s gross domestic product revealed that UK economic growth in the last quarter was bigger than analysts had anticipated. That made market participants confident that the Bank of England will hike interest rates at next week’s meeting. Yet today, traders were not such confident, recalling that there are still policy makers who are not certain that the state of the economy warrants tighter monetary policy.

Thursday’s macroeconomic data added to concerns. The Distributive Trades Survey released by Confederation of British Industry showed a balance of -36%, meaning that more retailers saw a drop of sales from the previous year than an increase. In fact, retail sales were falling at the quickest rate since the height of financial crisis in March 2009.

GBP/USD dropped from 1.3262 to 1.3150 as of 22:02 GMT today. GBP/JPY slid from 150.83 to 149.91. EUR/GBP dropped from 0.8905 to 0.8860, retreating from the daily high of 0.8956.

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