Sterling hit a 6-1/2 month low against the euro on Thursday after weak UK retail sales data increased concerns that Bank of England policymakers may opt to inject more stimulus into a faltering economy. British retail sales unexpectedly fell for the second month in a row in September, lending weight to the view that the UK economic recovery has peaked.
The data dented the pound, which has come under selling pressure since BoE minutes on Wednesday showed one policymaker, Adam Posen, calling for a resumption of stimulus through quantitative easing. "Worries about more QE have been weighing on sterling, there has been a lot of selling on that," said Richard Wiltshire, chief FX Broker at ETX Capital. "UK policymakers have all admitted there are a lot of risks to the economic recovery and that will keep sterling under pressure. I don't see any reason to buy sterling at the moment".
At 1502 GMT, the euro was up 0.8 percent at 88.81 pence, having earlier touched a high of 89.07 pence, its strongest since March 31, though it struggled to sustain a move above 89. Falls versus the euro helped push sterling's trade-weighted index down to 78.6, its weakest in nearly five months, while the pound fell 0.4 percent against the dollar to $1.5775. CMC Markets analyst Michael Hewson said 88.95 pence was a key technical level, marking the 61.8 percent retracement of the down move from just above 94 pence in October 2009 to just below 81 pence in June this year.
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