October 26, 2017 / 8:01 AM / 8 months ago

Sterling builds on strong GDP data boost

LONDON (Reuters) - Sterling climbed to a 9-day high on Thursday as strong growth data boosted expectations the Bank of England would raise interest rates next week.

FILE PHOTO: A one pound coin lies on a Union Flag in this picture illustration shot on May 3, 2017. REUTERS/Darren Staples/Illustration/File Photo

Wednesday’s gross domestic product growth for the quarter beat expectations, bolstering the chances of a rate hike after the next BoE meeting on Nov. 2 and fuelling discussions over whether that would be the start of a series of hikes.

GDP growth rose to 0.4 percent in the third quarter from 0.3 percent in the second, beating expectations of most economists for 0.3 percent growth, a performance finance minister Philip Hammond described as “solid”.

Sterling reached a 9-day high of $1.3278 on Thursday, building on Wednesday’s gains.

Against the euro it was down 0.2 percent, trading at 89.29 pence at 0744 GMT.

“(The data) did actually on balance surprise on the upside and has been supporting expectations even further that the Bank of England will hike interest rates next week,” said Manuel Oliveri, currency strategist at Credit Agricole.

“We believe that there is room for more stable growth conditions ... If that’s something that intensifies over the next few quarters then it speaks against a market that is speculating on the BoE hiking once next week and that that will be the end of the rate hike cycle,” Oliveri added.

Data released on Thursday showed strong growth in the number of homes British construction companies applied to build over the three months to the end of September.

But worries about the progress of Brexit negotiations continue to weigh on the pound, with confusion over the details of the government’s strategy adding to a climate of uncertainty.

Mixed messages from British Prime Minister Theresa May and Brexit minister David Davis on Wednesday over the timetable of Britain’s exit from the European Union led to a day of clarifications and breathed new life into political divisions over when British lawmakers would vote on a Brexit deal.

Reporting by Polina Ivanova; Editing by Saikat Chatterjee and

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