The pound is a “sick little puppy” as it hits a 10-month low and is expected to continue its decline, analysts warned, after UK retail unexpectedly declined in December.
On Friday the pound fell 0.2pc against
the euro to hit a ten-month low of 1.192, while it fell for the
six-consecutive day against the dollar, down 0.4pc to 1.592. Photo: PA
On Friday the pound fell 0.2pc against the euro to hit a ten-month low of
1.192, while it fell for the six-consecutive day against the dollar, down
0.4pc to 1.592.
"UK retail sales left their mark on sterling," said Kathleen
Brooks, research director of UK, Europe and Middle East at Forex.com.
"This [retail sales] data is not disastrous, but it does suggest the UK
consumer is cautious as we start 2013.
"The pound is definitely in the weak basket of currencies right now and
with interest rates so low and unlikely to move higher any time soon. We may
not have seen the bottom in sterling just yet."
Retail sales unexpectedly fell 0.1pc in December, dashing hopes that Christmas
shoppers would provide a last-minute lift to an economy on the verge of
another contraction.
The contraction, which also produced the slowest year-on-year growth in
December sales since 1998 – with the exception of 2010 when a harsh winter
battered trade – was driven by non-food goods, according to Office for
National Statistics' figures.
The pound has now fallen more than 2.5pc so far this year.
“Sterling continues to look like a sick little puppy as [it] firmly sliced through the key 1.60 [against dollar] and 1.20 [against euro] levels like a pair of knives through hot butter,” said Lee McDarby, head of dealing for the corporate & institutional treasury desk at Investec.
“The ease at which these psychological rates gave way suggests that this downwards slump for the pound is not necessarily over just yet.”
There was further pressure on the pound after excerpts from a proposed speech by David Cameron were released today. They show Mr Cameron had planned to warn that Britain risked “drifting towards the exit” of the EU unless there was fundamental reform.
The Prime Minister's speech, originally understood to be planned for January 22, was brought forward to avoid it coinciding with an anniversary marking 50 years of Franco-German friendship, but was postponed again today due to the hostage crisis in Algeria.
Investors have become concerned that a loosening of the Britain’s relationship with the EU will threaten London’s role as a financial centre.
New Bank of England policymaker Ian McCafferty also raised doubts about the pound on Friday, questioning whether sterling was at the right level to ensure economic rebalancing, and said the central bank should be open to new policies.
Asked in a Bloomberg TV interview whether he would favour a weaker level for sterling to help exports, McCafferty said there "are questions on whether sterling is now at a competitive level in terms of allowing that fundamental rebalancing".
Conversely, the euro is being lifted by the market’s perception that the eurozone is a safer place to invest so far this year.
Mr McDarby said it was becoming more and more apparent that hedges to protect against a collapse of the single currency were being unwound, with the euro "firmly returning to vogue".
Earlier this month, HSBC said the sterling would weaken further as it faced a destructive "triple cocktail" in 2013".
"The pound's fiscal credibility is under threat as a sovereign downgrade looms," the bank said in its 2013 HSBC View.
Alongside that, the bank says austerity is now kicking in at a time when the MPC appears less activist which could see a 'what's wrong with a weaker currency' attitude prevail.
And the UK's failings will start to "grab attention" as the US steps back from the fiscal cliff, momentum grows in China, and eurozone break-up fears diminish.
"The pound looks set to lose the contest of the uglies," the HSBC report said, as its "frailties emerge from the shadows".
VIDEO: How you can profit from a falling pound
The pound has now fallen more than 2.5pc so far this year.
“Sterling continues to look like a sick little puppy as [it] firmly sliced through the key 1.60 [against dollar] and 1.20 [against euro] levels like a pair of knives through hot butter,” said Lee McDarby, head of dealing for the corporate & institutional treasury desk at Investec.
“The ease at which these psychological rates gave way suggests that this downwards slump for the pound is not necessarily over just yet.”
There was further pressure on the pound after excerpts from a proposed speech by David Cameron were released today. They show Mr Cameron had planned to warn that Britain risked “drifting towards the exit” of the EU unless there was fundamental reform.
The Prime Minister's speech, originally understood to be planned for January 22, was brought forward to avoid it coinciding with an anniversary marking 50 years of Franco-German friendship, but was postponed again today due to the hostage crisis in Algeria.
Investors have become concerned that a loosening of the Britain’s relationship with the EU will threaten London’s role as a financial centre.
New Bank of England policymaker Ian McCafferty also raised doubts about the pound on Friday, questioning whether sterling was at the right level to ensure economic rebalancing, and said the central bank should be open to new policies.
Asked in a Bloomberg TV interview whether he would favour a weaker level for sterling to help exports, McCafferty said there "are questions on whether sterling is now at a competitive level in terms of allowing that fundamental rebalancing".
Conversely, the euro is being lifted by the market’s perception that the eurozone is a safer place to invest so far this year.
Mr McDarby said it was becoming more and more apparent that hedges to protect against a collapse of the single currency were being unwound, with the euro "firmly returning to vogue".
Earlier this month, HSBC said the sterling would weaken further as it faced a destructive "triple cocktail" in 2013".
"The pound's fiscal credibility is under threat as a sovereign downgrade looms," the bank said in its 2013 HSBC View.
Alongside that, the bank says austerity is now kicking in at a time when the MPC appears less activist which could see a 'what's wrong with a weaker currency' attitude prevail.
And the UK's failings will start to "grab attention" as the US steps back from the fiscal cliff, momentum grows in China, and eurozone break-up fears diminish.
"The pound looks set to lose the contest of the uglies," the HSBC report said, as its "frailties emerge from the shadows".
VIDEO: How you can profit from a falling pound
No comments:
Post a Comment