Currency news - Sterling fails to capitalise

Sterling fails to capitalise - 12-08-08

Sterling remained on the defensive against the dollar on Monday and dipped to the lowest level for close to 23 months with a trough below the 1.91 level. The UK currency hit tough resistance close to the 0.78 level against the Euro, although selling pressure was contained as the Euro also remained under pressure.

The RICS housing survey recorded a further decline in activity and prices while the BRC survey recorded a drop in retail sales which will reinforce the negative growth outlook. Sterling retreated to fresh multi-month lows below 1.90 in early Europe on Tuesday.

UK consumer inflation rose to a headline rate of 4.4% from 3.8% the previous month as food and energy prices rose strongly while the core rate also rose to 1.9% from 1.6%. The Bank of England will certainly remain concerned over inflation, but markets are looking beyond the near-term data with a focus on growth and medium-term trends, especially as oil and commodity prices have fallen. The UK currency struggled to gain any significant support from the data which suggests an important shift in sentiment towards the high-yield currencies.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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