LONDON, Sept 12 — Sterling fell to its lowest level since early 2021 against a robust euro today, while news that Britain’s economy grew less than expected in July highlighted a weak growth outlook.

A broad pullback in the dollar meant there was some respite for a battered pound, which rallied 1 per cent to US$1.17 (RM5.27) — its highest in almost two weeks and up from a 37-year low hit last week at US$1.1407.

But against the euro, sterling weakened further in a move analysts largely attributed to strength in the European single currency following hawkish commentary from the European Central Bank over the weekend.

The pound fell to as low as 87.215 pence per euro, taking it back to levels last seen in early 2021. It was last down about 0.6 per cent at 87.18 pence per euro.

Overall sentiment towards the pound remained weak with data on Monday highlighting that the UK economy is showing signs of strain from surging prices. Britain’s gross domestic product grew by 0.2 per cent in July from a month earlier, versus economist expectations for growth of 0.4 per cent.

"The adjustment for the June bank holiday makes the figures a little difficult to read and we think the Bank of England (BoE) will take more notice of tomorrow’s August jobs data for insight into how tight the UK labour market really is,” said Chris Turner, global head of markets at ING.

"All in, we expect the BoE to hike 50 bps again when it decides policy rates on 22 September.” The BoE, which was scheduled to meet this Thursday, has postponed its rate decision by a week following the death of Queen Elizabeth.

It forecasts Britain to slip into a recession at the end of 2022 and not come out of it until early 2024, due in large part to the hit to living standards from the energy price surge.

ING’s Turner said the pound could probably get back down to the recent lows seen against the dollar in the US$1.14 area. — Reuters