Sterling dips against dollar

Sterling dipped against the dollar on Monday after a survey showed a drop in retail sales in October and a Bank of England policymaker said rate hikes before a meaningful fall in the jobless rate would damage the economy. Gilt yields held steady near two-month lows, but traders said volumes were around half that of a normal day as adverse weather conditions in London and southern Britain meant many were unable to make it into work.
The pound was down 0.2 percent at $1.6131. It was expected to struggle to rise above stiff chart resistance at the October 1 high of $1.6260 and at $1.63. BoE policymaker David Miles said Monday's storm could have a small impact on UK economic growth and added that it would be "pretty catastrophic" to raise rates before unemployment was down by a meaningful amount.
Earlier, the Confederation of British Industry said the retail sales balance in its distributive trades survey slumped to +2 in October from a 15-month high of +34 in September. This was much weaker than the +33 forecast and raised concerns about the sustainability of the UK's recent recovery. "The CBI data may have had a drip feed effect," said Richard Wiltshire, chief foreign exchange dealer at ETX Capital. "But sterling price action has been pretty poor. The longer sterling/dollar stays below $1.6250/60 then the bias remains rangey," he said, adding that many FX desks in London were running on skeleton staff.
Analysts and traders said the pound could edge back towards the October 1 peak, its strongest since early 2013, as concerns about the outlook for the US economy weigh on the dollar. "The muted reaction to the GDP data on Friday suggested many felt the figures were encouraging but not strong enough to change the Bank of England's forward interest rate guidance," said Nawaz Ali, analyst at Western Union Business Solutions. "I'd expect to see a $1.60-$1.63 range in sterling/dollar in the short term, until we know the relative monetary policy positions of the Fed and the Bank of England." Sterling was steady against the euro at 85.45 pence per euro. Last week, the euro hit a two-month high of 85.555 pence. Ten-year gilt yields traded at 2.60 percent, near a two-month low, with the spread over German Bund yields little changed at 86 basis points.