Sterling steadied this morning after posting its biggest four-day decline in two months against the dollar as investors grew bearish about the outlook of the economy.
The British pound was broadly flat against the dollar after weakening 1.4 percent in the last four sessions. It was the biggest four-day losing streak since mid-June, according to Thomson Reuters data.
The Brexit negotiations doesn’t seem to have started on a strong note and that is weighing on the economy and the currency.
British retail sales grew more slowly in July, as shoppers cut back on non-essential spending and budgeted for the higher price of food following the June 2016 Brexit vote.
Against the euro, sterling was poised to strike a fresh 10-month low below 90.61 pence after the monetary policy outlook between the European Central Bank and the Bank of England showed more signs of diverging in recent days.
Although BoE rate-setters tried last week to drive home the message that interest rates are likely to rise, the market has chosen to focus on their 6-2 vote to keep rates on hold, down from 5-3 in the last meeting, as well as downward revisions of growth and inflation forecasts.
The ECB is set to reconsider its monetary stimulus programme in the autumn. Core inflation in the currency bloc unexpectedly accelerated to a four-year high last month while unemployment has fallen to its lowest since 2009.