April 27, 2018 / 8:43 AM / a year ago

Sterling slumps after UK growth slows to weakest since 2012

LONDON, April 27 (Reuters) - Sterling fell to an eight-week low against the dollar on Friday after Britain’s economy slowed much more sharply than expected in the first three months of 2018.

Sterling slumped 0.8 percent to $1.3813 after Britain’s economy grew at its weakest pace since the fourth quarter of 2012, expanding by just 0.1 percent in Q1 2018.

That figure was at the bottom end of economists’ forecasts in a Reuters poll and well below the BoE’s prediction of a drop to 0.3 percent.

Market expectations of a BoE rate hike next month fell to 25 percent from 50 percent before the data was released.

British government bond prices jumped after the data with June futures contracts extending earlier gains by about 30 basis points. The yield on rate-sensitive two-year gilts fell to as low as 0.843 percent, its lowest since Tuesday.

Britain’s FTSE 100 jumped sharply, up 0.4 percent, after the slide in sterling on weaker than expected data. Multinational exporting companies on the index tend to make gains when the pound falls. (Additional reporting by William Schomberg and Helen Reid)

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