LONDON, May 14 (Reuters) - Sterling hit a three month low versus the dollar, while UK stocks fell and gilts pared losses on Wednesday after the Bank of England's quarterly report showed inflation staying above target and growth slowing sharply.
Analysts say rising price pressures will limit the scope for growth-boosting interest rate cuts in coming months, potentially causing further problems for the economy.
"Overall the report makes very bearish reading really as far as sterling is concerned with the higher inflation and the weak growth picture as well," said Ian Stannard, senior FX strategist at BNP Paribas.
Sterling fell as low as $1.9366 <GBP=>, down around half a cent from levels seen before the inflation report.
At 0935 GMT, Britain's FTSE 100 <.FTSE> extended earlier losses, down 10.3 points, or 0.2 percent at 6,201.6.
The June long gilt future <FLGc1> pared losses, with the contract at 107/63, compared with 107.54 earlier. The June short sterling contract also pared losses, to stand at 94.220, down 2 ticks on the day. Before the BoE, it was at 94.215 <FSSM8>.
Earlier in the session, short sterling hit 94.200 - its lowest level since Oct. 21.
For more on the inflation report see [ID:nBOE001414].
(Reporting by London Markets Team)
((antonina.vorobyova@reuters.com; Tel: +44207 542 7958, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net))
Keywords: MARKETS BOE
LONDON, May 14 (Reuters) - Sterling extended losses towards an earlier three-month low versus the dollar on Wednesday after rises in UK earnings growth and in unemployment benefit claims highlighted the dilemma facing the Bank of England.
A slowing economy points to the need for interest rate cuts, while price pressures limit the scope for monetary easing.
For more on the UK jobs data see [nONS003525]
Sterling fell to around $1.9408 after the data, from $1.9450 previously. Earlier it hit a near three month low of $1.9392 <GBOP=>.
"The devil is in the details, and it is disapponting with regard to the jobless claims creeping higher than expectations," said Paul Mackel, director of currency strategy at HSBC Markets.
"It raises the debate over whether are we seeing a turning point in global market conditions ... and whether financial market weakness is starting to affect the UK labour market."
Next, the focus turns to the Bank of England's quarterly inflation report at 0930 GMT.
(Reporting by Naomi Tajitsu and Toni Vorobyova)
((antonina.vorobyova@reuters.com; Tel: +44207 542 7958, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net))
Keywords: MARKETS STERLING/JOBS
LONDON, May 14 (Reuters) - The euro fell sharply against the dollar in early European trading on Wednesday, with automatic sell orders triggered by strong dollar buying interest versus Asian curencies, traders said.
By 0712 GMT, the euro had fallen to session lows at $1.5412, leaving it down a quarter percent on the day <EUR=>.
"We are just going through stops around overnight lows, and the lows from yesterday, around the $1.5430-35 levels," said a trader in London, adding that there was also strong buying interest in the dollar versus Asian currencies.
(Reporting by Toni Vorobyova and Veronica Brown)
((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS FOREX/EURO
LONDON, May 13 (Reuters) - Sterling extended losses on Tuesday, erasing initial gains made after a surge in UK inflation, as it raised concerns about the health of the British economy down the line.
Sterling tumbled roughly half a percent to $1.9475 <GBP=>, falling from a session high of $1.9594 hit shortly after the announcement of strong British consumer prices figures, and approached its lowest level in nearly three months.
The euro recovered from a momentary slide after the CPI data to trade at 79.40 pence <URGBP=>, little changed on the day.
Figures showed that British consumer prices surged 0.8 percent in April from March, exceeding expectations for a 0.5 percent rise. Annual inflation leaped 3.0 percent, versus forecasts for a 2.6 percent. Click on [nONS003519]
The data had intially boosted the pound on the view that the Bank of England may delay its rate-cutting campagin as inflation risks persist.
But analysts said that ultimately, the market's view remains intact that UK rates will have to fall.
"I tihnk the bank will cut again. If you look at the activity numbers they are very weak -- the BRC and the RICS housing survey were both very weak. All the indications on the activity side are that the econony seems to be cooling,"
(Reporting by Veronica Brown and Naomi Tajitsu)
((naomi.tajitsu@reuters.com; Tel: +44207 542 5830, Reuters Messaging: naomi.tajitsu.reuters.com@reuters.net))
Keywords: MARKETS FOREX/STERLING
LONDON, May 13 (Reuters) - Sterling briefly jumped and UK gilts futures fell, while stocks wiped gains on Tuesday after a strong reading of British consumer prices placed a question mark over whether the Bank of England will cut rates in June.
Figures showed that British consumer prices surged 0.8 percent in April from March, exceeding expectations for a 0.5 percent rise. Annual inflation leaped 3.0 percent, versus forecasts for a 2.6 percent. Click on [nONS003519]
Sterling jumped to a session high of $1.9594 <GBP=> from $1.9520 before the announcement, momentarily erasing earlier losses and edging away from $1.9441 hit on Monday, its lowest level in nearly three months.
The euro fell 0.3 percent to 79.16 pence <EURGBP=>, retreating from a three-week high hit earlier in the day.
Short sterling contacts -- a gauge of future interest rates -- fell sharply to trade as much as 11 ticks lower, having been as much as four ticks higher prior to the data.
The June gilt future <FLGM8> was 23 ticks lower at 108.73.
Bund futures <FGBLc1> pared earlier gains and were last three ticks up on the day at 115.05, having traded around 115.11 before the data. December interest rate futures turned negative and were last 0.5 ticks lower.
Britain's FTSE 100 <.FTSE> share index gave up gains to trade flat at 6,220.4.
"It was a pretty horific headline number... and it limits the scope for monetary easing from the Bank of England, it will be hard for them to cut in June," said Lee Hardman, currency economist at BTM-UFJ.
(Reporting by London Markets Team)
((naomi.tajitsu@reuters.com; Tel: +44207 542 5830, Reuters Messaging: naomi.tajitsu.reuters.com@reuters.net))
Keywords: MARKETS UK/CPI
Next: Sterling jumps, gilts extend loss after UK PPI data