By Greta Rosen Fondahn
(Reuters) -Sterling jumped on Thursday after data showed the British economy unexpectedly grew in the final quarter of last year, offering a brief respite from an otherwise downbeat economic outlook.
The pound rose to $1.25155 against the dollar after the data, its highest in over a week. It was last up 0.42% at $1.24975.
Britain’s economy grew by 0.1% in the fourth quarter, figures from the Office for National Statistics showed.
Economists polled by Reuters had forecast that British gross domestic product would shrink by 0.1% in the period.
Despite the beat, analysts said the data still showed a lacklustre story about the British economy.
James Smith, economist at ING, noted that the GDP growth was due to a surge in inventories.
“These are a notoriously volatile accounting fixture which, unlike other parts of the GDP breakdown, don’t tell us much about the underlying health of the economy,” Smith said.
“The areas that do – household consumption, exports, and business investment – were all flat, or negative.”
Sterling, last year’s best performing G10 currency against the dollar, has fallen about 0.1% since the start of the year, while markets have moved to price in more easing from the Bank of England this year as the economy slows.
“Risks are still firmly tilted to the downside in the UK,” said Michael Brown, senior research strategist at Pepperstone.
Markets price in 54 basis points of further central bank easing this year from the BoE.
The pound was largely flat against the euro, with one euro at 83.39 pence.
(Reporting by Greta Rosen Fondahn; Editing by Amanda Cooper)
