Pound sterling falls due to unexpected contraction in UK economy

The British pound slipped below 1.2920 as Friday's data showed the economy contracted by 0.1% in January, with analysts expecting it to have risen by 0.1%. The main factor contributing to the fall was the weakening in the manufacturing sector.

Last month, the Bank of England (BoE) revised its GDP growth forecast for the first quarter down to 0.1% from the 0.4% previously expected in November. Now, investors' attention is focused on the upcoming BoE monetary policy meeting. Investors expect the interest rate to remain at 4.5%.

Of additional interest is the Chancellor Rachel Reeves’ Spring Statement due on March 26. It will contain plans to rein in public spending. The Office for Budget Responsibility will publish an updated economic outlook and government borrowing forecast.

Meanwhile, concerns about the US economy and the consequences of tariff expansion are putting pressure on the dollar, partially supporting the pound, as reported by Trading Economics.