"The market is long of sterling and has pushed it lower on the back this data. There's enough momentum in the U.K. economy and a danger of over-interpreting what this number means."
- Gavin Friend, a foreign-exchange strategist at National Australia Bank
The Sterling lost ground versus the U.S. Dollar for the first time in three days following disappointing fundamental data that raised concerns about the sustainability of the U.K. economic recovery. Weak retail sales, disappointing construction and industrial outputs have all pushed the Pound lower on Thursday.
Even despite the festive season, retail sales slowed down in December, hitting a twelve-month low, while on a yearly basis sales were 1.8% higher, after a 1.5% gain in December 2012, also the slowest growth of the last year. The data pushed the three-month average to 2.2%, while the 12-month average stands at 2.8%. However, the retail sector was not the only disappointment, as construction sector plunged 4% on a yearly basis in November, posting the biggest fall since June 2012. Moreover, activity in manufacturing and industrial sectors stalled in November. Within the total production, substantial falls were registered in mining and quarrying as well as the water and waste management sectors. The largest downside pressure came from the extraction of natural gas.
While analysts believe the Bank of England will start raising interest rates sooner than it is planned, the latest data may tamper the optimisms and force Mark Carney to leave rates at the record-low in the foreseeable future.
© Dukascopy Bank SA