LONDON, Feb 20 — Sterling slipped for the fourth straight day against the dollar today as the US currency’s broad-based strength and jitters over the start of Britain’s trade talks with the EU offset data showing a strong rebound in UK retail sales.
The currency ticked higher immediately after the release. Earlier, it had fallen to 10-day lows of US$1.2884 (RM5.39) but the modest move fizzled quickly, leaving the pound 0.1 per cent lower at US$1.2908.
Sterling had posted a 0.6 per cent loss on Wednesday for its biggest daily fall since early-February.
Against the euro, it likewise was flat at 83.69 pence, near a one-week low.
The data showed retail sales volumes up 0.9 per cent on the month in January on a seasonally adjusted basis, after a 0.5 per cent fall in December — the biggest rise since March and a stronger turnaround than the 0.7 per cent month-on-month growth predicted by a Reuters poll.
Sterling’s short-lived rise is akin to what happened on Wednesday when it shrugged off an above-forecast inflation reading and extended losses.
“In the short-term, UK data will surprise to the upside as we are in the post-election bounce. That means it is by no means a given that the next Bank of England (interest rate) move will be downward,” said Colin Asher, strategist at Mizuho.
“But in the very short term it’s all about the dollar being the outperformer.”
The greenback has surged to three-year highs against a currency basket and shows no sign of retreat, thanks to its superior growth and relative immunity to damage from the coronavirus outbreak.
There is also concern that both the European Union and Britain appear to be hardening their stance before talks formally kick off next month to thrash out post-Brexit trading arrangements between the sides.
An adviser to the EU’s chief trade negotiator, said on Wednesday talks would be “rather difficult”, especially due to “level playing field” clauses on fair competition. UK Prime Minister Boris Johnson’s Europe adviser meanwhile, has said accepting EU supervision of level playing field issues goes against the point of Brexit.
These issues have taken the edge off a sterling rally which saw it post its best weekly gain in two months last month after the appointment of a new finance minister who is expected to loosen the fiscal taps to kick start growth.
Money market expectations for the BOE policy did not budge after the data, still showing a roughly 75 per cent possibility of a 25 basis-point cut in December. — Reuters
