Sterling continued its recent volatile form against the US dollar, losing nearly one and half cents on Wednesday. The initial catalyst for this weakness were the minutes from the latest Bank of England (BoE) meeting which revealed no change in the 7-2 split in favour of leaving the UK interest rate at 0.5%. The second factor was markets trying to second guess what the Federal Reserve announcement, following their last meeting of the year, would contain. Against the euro sterling held firm.
A separate report showing steady unemployment of 6%, and a better-than-expected wage increase saw sterling appreciate against the euro for the second day in a row. The minutes revealed that BoE officials view the sustained drop in oil prices as more significant than recent wage growth when considering a rate hike, suggesting that any increase is unlikely until late 2015. This was in contrast to the Federal Open Market Committee in the US, which appeared to be gearing up for an interest rate increase in early 2015, pushing the US dollar higher across the board.
Today sees the release of retail sales figures from November. These are expected to have slowed to show only a 0.3% increase over October, and any unexpected pre-Christmas rush could see sterling appreciate.