Sterling recovers falls after 'boring Brexit budget'

FILE PHOTO: UK pound coins plunge into water in this illustration picture, October 26, 2017. REUTERS/Dado Ruvic/Illustration/File Photo

LONDON (Reuters) - Sterling recovered losses it suffered during the delivery of Britain’s budget on Wednesday to trade slightly higher, with traders seeing little - even in downward growth forecasts - that dramatically changed the picture for the economy.

Sterling had dipped to as low as $1.3213 as chancellor Philip Hammond delivered the budget, with traders citing disappointment that lower growth forecasts had not been made up for by new fiscal stimulus measures.

But the pound recovered to trade at $1.3262 after Hammond finished speaking, up 0.2 percent on the day and up from the $1.3241 it had been trading at before the statement.

“This is a pretty boring Brexit budget. There is really nothing that will be a game-changer,” said ING currency strategist Viraj Patel.

“One thing worth pointing out is that institutions like the OBR (Office for Budget Responsibility) and the BoE (Bank of England) will take the most cautious stance when forecasting future growth, so what we are seeing from them is the worst-case forecasts.”

The OBR slashed Britain’s official forecasts for gross domestic product growth in 2017 to 1.5, compared with a forecast of 2.0 percent made in March, Hammond said.

The FTSE 100, which tends to show a negative correlation with sterling because of its international focus, dipped from its earlier highs but still traded up 0.5 percent, around the same levels as just before Hammond’s speech.

Reporting by Jemima Kelly; Additional reporting by Saikat Chatterjee and Helen Reid; Editing by Dhara Ranasinghe