Sterling fell in European trade on Thursday against a basket of major rivals, extending losses for the fourth straight session against the dollar following surprising UK growth data.

The data showed the UK economy contracted more than expected in the fourth quarter of last year, likely pressuring Bank of England to ease policies sooner than planned.

GBP/USD

GBP/USD fell 0.2% to 1.2542, with a session-high at 1.2574, after closing down 0.2% on Wednesday, the third loss in a row, plumbing a one-week trough at 1.2525 following UK consumer prices data.

Surprising Data

Earlier UK data showed the GDP contracted by 0.3% in the fourth quarter of 2023, while analysts expected a 0.1% contraction, and after a 0.1% contraction in the third quarter.

Such data clearly puts pressure on BOE policymakers to start easing policies and cutting rates as soon as possible to prop up growth.

UK Rates

Markets now expect a 20%% chance of a BOE rate cut in March, and a 70% chance of such a cut in May.

Traders overall expected an average of 78 basis points of UK interest rate cuts this year, up from 69 basis points before growth data.