Sterling traded predominantly sideways this morning, with GBP/USD seen settling at $1.6369 by 12.05pm (London time).

GBP/USD flirted around the $1.64 during the early morning trading session, yet selling pressure intensified around these levels following the Confederation of British Industry’s (CBI) dovish outlook. According to the CBI, the UK economy will continue to expand next year, ‘but growth will be patchy and slow’. The CBI also downgraded its forecasts for UK GDP today, saying it expects this year’s GDP to expand at a rate of 1.7% (lower than a previous forecast of 1.8%) and growth in 2012 to come in at 2.2% (down from a prior estimate of 2.3%). ‘The recovery continues to be choppy and lacking in vigour’, said Ian McCafferty, CBI Chief Economic Adviser.

‘Expansion in certain sectors is being offset by weaker performance in others. What remains striking is how little we expect the pace of growth to accelerate in 2012, and that it will be far less robust than we’d normally expect in the second and third years of a recovery.’ A sell-off in the UK banking sector, following disappointing results from HSBC, and a sharp drop in British house prices also weighed on sterling today. The Halifax house price index suffered its biggest annual fall since October 2009, dropping 1.2% in April.