Sterling fell to a nine-month low against the dollar on Friday after a surprisingly big fall in UK retail sales highlighted weak consumer demand. Already knocked by worse than expected public finances data on Thursday, the pound extended losses on the view that a painfully slow economic recovery and a grim fiscal position would keep sentiment towards the currency negative.
Also keeping sterling weak was a rally in the dollar after the market took the Federal Reserve's surprise increase in its discount rate as a sign of a future hike in US interest rates, which are likely to rise before British ones. Sterling fell to $1.5345, its weakest since May 2009, after figures showed UK retail sales fell 1.8 percent on the month in January, their sharpest slide in 1-1/2 years.
"UK retail sales figures for January are awful," said James Knightley, senior economist at ING in London. Many in the market expect dark clouds to hang over sterling as long as there are signs the economy is suffering and the government sinks deeper into debt.
Sterling fell as low as $1.5345 after the retail sales data, before trimming some losses to trade around $1.5405 by 1512 GMT, down 1.4 percent from late levels in New York. The euro rose 0.7 percent on the day to 87.91 pence, its highest since February 11.
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