Sterling continued to fall on Friday, weakening for a fourth straight week against the US dollar thanks to an unexpected increase in US retail sales data which helped strengthen the US dollar to a fresh 14-month high against sterling. Data released on Friday showing a return to growth in both the French and German economies also resulted in sterling hitting a 1-month low against the single currency.
After a terrible week for sterling, there are a few key releases this week which could help reverse the current trend, or indeed cause further losses for sterling. Following the Bank of England (BoE)’s decision to lower their inflation estimates and growth forecasts last week, the BoE is set to take centre stage once against when it holds its monthly rate setting meeting on Wednesday. Following last week’s announcements, we expect interest rates to be kept on hold at 0.5% for the foreseeable future and so we would expect to see a muted response from the market. On Tuesday we will see confirmation of the latest UK inflation figure, which is expected to have remained steady at 1.2%, still far below the central banks 2% target. Otherwise, Thursday’s retail sales will be the only other major release from the UK, and investors will be hoping for a similarly positive figure to that release from the US last week.