LONDON: Sterling fell to an nine-week low against the dollar and held close to a 10-month low versus the euro on Friday after weaker-than-expected retail sales data added to concerns about a struggling British economy.
Weaker-than-expected UK data exacerbated a drop in the pound, which has taken a knock in recent sessions due to uncertainty over Britain's relationship with the European Union, pushing it to a nine-month low against a basket of currencies.
The pound fell 0.8 per cent to hit $1.5857, with traders saying it extended falls after dropping below chart support at its 200-day moving average around $1.5909, eventually reaching its lowest since Nov. 16.
This left it on track for its biggest weekly fall since June. It could now target the Nov. 15 low of $1.5828, below which would mark its lowest since early September.
UK retail sales unexpectedly fell by 0.1 per cent during December, increasing the likelihood that the country may have contracted in the fourth quarter after a third-quarter bounce.
This could leave the pound under pressure next week as investors await the first estimate of fourth-quarter gross domestic product on Friday.
"With sterling we had the weaker-than-expected retail sales, which were pretty weak especially for December," said Christian Lawrence, currency analyst at Rabobank.
However, he said the falls in sterling were tempered due to market talk of a below-consensus number before the release, adding that the pound had chart support around a confluence of recent lows between $1.5840 and $1.5825.
The euro was up 0.2 per cent at 83.78 pence, having earlier risen to a high of 83.885 pence, its strongest since late March, when it stopped just shy of reported options barriers at 84 pence.
Broad falls drove the trade-weighted sterling index down to 82.0, its lowest since early April, data from the Bank of England showed.
"It does not look too good for sterling, given the grim economic picture," said Richard Driver, currency analyst at Caxton FX. "We are looking at 85.10 pence in euro/sterling by the middle of the first quarter."
WEAK ECONOMY
Britain's economic concerns have increased this week after news that music and DVD retailer HMV and DVD rental firm Blockbuster UK had gone into administration.
"The (retail sales) data highlights that there is still weak growth in the UK and as well as uncertainty related to monetary policy," said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi.
"The UK's ongoing membership of the EU is not helping as well and is impacting short-term sentiment towards the pound. There is a bias for the pound to weaken still."
A keynote speech by Prime Minister David Cameron, in which he was due to warn that the UK could drift out of the EU if the bloc did not undertake reforms, was postponed at the last minute due to the Algerian hostage crisis.
He had been expected to spell out his plans to renegotiate Britain's membership and promise a rare referendum on any deal he struck.
The possibility of Britain looking to leave the EU had left investors inclined to sell the pound. As well as the GDP data, market players will also be looking to the minutes to the last Bank of England meeting on Wednesday.A weaker pound will be welcomed by the Bank of England, however.
New BoE policymaker Ian McCafferty raised doubts about whether sterling was competitive in a television interview on Friday when asked about whether he would favour a weaker level for sterling.
But he also said in a speech later that restarting the BoE's asset purchase stimulus programme would give little help to the economy.
indiatimes.com
Weaker-than-expected UK data exacerbated a drop in the pound, which has taken a knock in recent sessions due to uncertainty over Britain's relationship with the European Union, pushing it to a nine-month low against a basket of currencies.
The pound fell 0.8 per cent to hit $1.5857, with traders saying it extended falls after dropping below chart support at its 200-day moving average around $1.5909, eventually reaching its lowest since Nov. 16.
This left it on track for its biggest weekly fall since June. It could now target the Nov. 15 low of $1.5828, below which would mark its lowest since early September.
UK retail sales unexpectedly fell by 0.1 per cent during December, increasing the likelihood that the country may have contracted in the fourth quarter after a third-quarter bounce.
This could leave the pound under pressure next week as investors await the first estimate of fourth-quarter gross domestic product on Friday.
"With sterling we had the weaker-than-expected retail sales, which were pretty weak especially for December," said Christian Lawrence, currency analyst at Rabobank.
However, he said the falls in sterling were tempered due to market talk of a below-consensus number before the release, adding that the pound had chart support around a confluence of recent lows between $1.5840 and $1.5825.
The euro was up 0.2 per cent at 83.78 pence, having earlier risen to a high of 83.885 pence, its strongest since late March, when it stopped just shy of reported options barriers at 84 pence.
Broad falls drove the trade-weighted sterling index down to 82.0, its lowest since early April, data from the Bank of England showed.
"It does not look too good for sterling, given the grim economic picture," said Richard Driver, currency analyst at Caxton FX. "We are looking at 85.10 pence in euro/sterling by the middle of the first quarter."
WEAK ECONOMY
Britain's economic concerns have increased this week after news that music and DVD retailer HMV and DVD rental firm Blockbuster UK had gone into administration.
"The (retail sales) data highlights that there is still weak growth in the UK and as well as uncertainty related to monetary policy," said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi.
"The UK's ongoing membership of the EU is not helping as well and is impacting short-term sentiment towards the pound. There is a bias for the pound to weaken still."
A keynote speech by Prime Minister David Cameron, in which he was due to warn that the UK could drift out of the EU if the bloc did not undertake reforms, was postponed at the last minute due to the Algerian hostage crisis.
He had been expected to spell out his plans to renegotiate Britain's membership and promise a rare referendum on any deal he struck.
The possibility of Britain looking to leave the EU had left investors inclined to sell the pound. As well as the GDP data, market players will also be looking to the minutes to the last Bank of England meeting on Wednesday.A weaker pound will be welcomed by the Bank of England, however.
New BoE policymaker Ian McCafferty raised doubts about whether sterling was competitive in a television interview on Friday when asked about whether he would favour a weaker level for sterling.
But he also said in a speech later that restarting the BoE's asset purchase stimulus programme would give little help to the economy.
indiatimes.com
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