It has been a tough week for sterling, with disappointing UK economic data, together with an increase in US interest rates, pushing the currency to an eight-month low against the US dollar.
A quiet start to the week saw little movement on Monday, as markets awaited the release of inflation data from both the UK and US on Tuesday. Despite UK inflation moving into positive ground for the first time in 4 months, a significant decline in manufacturing inflation saw sterling lose ground across the board. Wednesday saw further pressure mount on sterling as average earnings were shown not to have grown as fast as forecast throughout the previous quarter. Therefore, despite UK unemployment falling to the lowest level since 2008, markets took a dim view of the wage growth outlook, particularly when coupled with comments from Bank of England (BoE) voting members who talked down the prospect of a UK interest rate hike.
Sterling lost most ground against the US dollar yesterday however, as the decision by the Federal Reserve to raise interest rates sent sterling tumbling to an eight-month low. Despite retail sales throughout November significantly beating expectations, sterling failed to make any significant ground against its major trade partners.
No major economic data is set to be released from the UK today, with markets likely to be driven by further reaction to the US interest rate decision.