Sterling falls on lower retail data

Sterling was down on Thursday on data that showed retail sales down by 1.3 percent in January, the largest monthly decline since December of 2004. The decline in sales came despite a drop of 1.2 percent in retail prices on the year ending in January. As a result of the slower retail sales, the year on year growth rate dropped from 4.3 percent to only 1.3 percent.

This news accelerated talk that the Bank of England will be forced to drop UK interest rates again soon. It even spurred JP Morgan to reverse itself and say that chances are good that a rate cut will come as soon as next month and certainly by May. Other institutions predicting a rate cut by May include Bank of America, ING Financial Markets, and Investec Securities.

All this news sent sterling down 0.3 percent to $1.7352 in relation to the US dollar. The UK currency also dropped 0.2 percent to £0.6842 against the euro and it fell an identical 0.2 percent to ¥204.72 in relation to the Japanese yen.

The US dollar rose to a six-week high of $1.1848 in relation to the euro before falling back to $1.1878 against the shared currency.

Elsewhere, the Swedish krona dropped 0.6 percent to SKr9.3339 in relation to the euro, a six-week low. The drop was spurred by a decline of 0.9 percent in Swedish core consumer prices in January that put the year-on-year inflation rate at 0.9 percent. This was said to have put in question an expected quarter-point rise in interest rates when Sweden’s central bank meets next week. Also influencing the krona’s drop was a reported rise in the Swedish unemployment rate, from 5.4 to 6.3 percent.

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