Pound Sterling has dropped to a three month low against the Greenback on Thursday as the U.S. currency’s has out performed undoing the recent pound gains that were driven by the appointment of a new British finance minister Rishi Sunak. Since the high of 1.3070 after the appointment of Sunak the pound has now lost 1.4% this week dropping to 1.2887.
“The better-than-expected pickup in UK retail sales volume failed to offset the drag to sterling from heightened downside risk to global economic activity,” Commonwealth Bank of Australia. retail sales up 0.9% on the month in January in the UK, the biggest rise since march 2019, coupled with an above-forecast inflation reading on Wednesday has caused the Currency markets to start pricing out Bank of England interest rate cuts this year. The expectation is now if any cut at all it will be a 25 basis-point cut in December.
Other concern for the UK Euro pair is that both appear to be hardening their stance before talks begin next month to try and get new trading arrangements once the post-Brexit transition period ends. An spokesperson for the EU’s chief trade negotiator said talks would be “rather difficult”, especially due to “level playing field” clauses on fair competition while a top British Brexit adviser said accepting EU supervision of level playing field issues goes against the point of Brexit.
The dollar has climbed to a to three year high against a currency basket and shows no sign of slowing as U.S. economic growth and relative immunity to damage from the coronavirus outbreak make it a global safe haven of choice. Against the Euro the USD strength has push the exchange rate down as much as 3% and is currently trading at 1.0817.
Key releases today will be EUR Euro-Zone Consumer Price Index