The pound was lower against the dollar for the sixth straight session on Friday as a combination of concerns over a possible British exit from the European Union and soft economic data weighed. GBP/USD hit lows of 1.5237 the weakest since the 8th May. Sterling ended the week down 1.2%. The pound has come under pressure amid renewed concerns over a U.K. referendum on EU membership. Prime Minister David Cameron’s government introduced a law in parliament on Thursday to ensure the referendum will be held by the end of 2017. Sentiment on the pound was also hit after a report on Friday showed that British consumer sentiment deteriorated unexpectedly this month as optimism about the economy over the next 12 months declined. The report came just one day after official figures confirmed that the U.K. economy grew just 0.3% in the first quarter, fuelling concerns that the economic recovery is losing momentum. Recent soft economic data has underlined expectations that the Bank of England will leave interest rates on hold for longer.
The euro moved higher against the dollar on Friday after data showed that the U.S. economy contracted in the first quarter, but continued expectations for a rate hike later this year continued to underpin dollar demand. EUR/USD was up 0.37% to 1.0988 in late trade, but the single currency ended the month down 1.89% against the broadly stronger greenback. The single currency remained under pressure as Athens continued long-running negotiations with its lenders on a cash-for-reforms deal ahead of a €305 million payment to the International Monetary Fund due on the 5th June. The Greek government expressed confidence on Friday that a deal with creditors is close. However, the country’s creditors have played down optimism over an agreement. IMF head Christine Lagarde warned Friday that a deal was very unlikely to come soon, while the European Commission said that more work must be done.
n the U.S. data on Friday showed that the economy contracted in the first quarter, but recent indications of a rebound in growth continued to support expectations for higher interest rates. The Commerce Department said U.S. gross domestic product contracted at an annual rate of 0.7% in the first three months of the year, instead of the initial estimate of 0.2% growth. However, it was still better than economists’ forecast of a 1% contraction. The dollar strengthened broadly in May as stronger U.S. economic data prompted investors to bring forward expectations on the timing of an initial rate hike by the Federal Reserve. Upbeat reports on inflation, new home sales, business investment and consumer confidence during the month all indicated that the economy is gaining momentum after a weak first quarter. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, eased to 96.94, holding below Wednesday’s five week peaks of 97.88. The index ended the week up 0.92%, bringing the month’s gains to 2.35%.