LONDON (Reuters) - Sterling faced its first week of falls in four on Friday as data showed an unexpected slide in British industrial output, clouding the outlook for the UK’s economy as it prepares to leave the European Union.
In the first full trading week since Britain triggered Article 50 - its notification to leave the EU - the pound sank against the dollar and the euro in moves analysts said were also part of a reappraisal of the path for monetary policy.
Sterling has been propped up in recent weeks by expectations that the Bank of England might consider a rate rise to rein in inflation but comments by policymakers this week - in particular Gertjan Vlieghe - have played down that prospect.
Data on Friday showed industrial output fell 0.7 percent in February, worse than all forecasts in a Reuters poll of economists that pointed to a 0.2 percent increase following a 0.3 percent decline in January.
Separate figures showed Britain’s goods trade deficit unexpectedly touched a five-month high in February and January’s deficit was revised upwards too, the Office for National Statistics said.
“The weakness we’ve seen (this week) is more on the data front,” said David Cheetham, chief markets analyst at XTB.
“I wouldn’t say Article 50’s responsible for the weakness we’ve seen in the pound but it obviously created an environment where the pound can be susceptible to weakening.”
The pound slipped to a one-week low in the wake of the data, falling further in the London afternoon as the dollar strengthened on a U.S. jobs report. It was last down 0.6 percent on the day at $1.2395.
The pound is set for a 1.3 percent weekly fall, its first decline in four weeks.
It was also 0.3 percent lower at 85.66 pence per euro on the day, having shed around 1 percent on the week - also its worst period in four weeks.
Bank of England rate-setter Vlieghe said earlier this week that a consumer slowdown in Britain was under way and underscored the need for caution on interest rates because the trend could worsen.
Governor Mark Carney added on Friday there were some signs of strength in consumer demand coming off and that the BoE would monitor the situation.
“The key point here is that this past week we’ve heard ... there’s less pressure on the Bank of England to hike rates,” said Sam Lynton-Brown, a currency strategist at BNP Paribas.
Editing by Mark Heinrich and Andrew Roche