Sterling falls versus dollar and euro

26 Mar, 2009

Sterling fell against the dollar and euro on Wednesday after a sharper than forecast fall in British retail sales highlighted a contracting economy. The Confederation of British Industrys distributive trades survey balance fell to -44 in March from -25 in February.
Analysts had expected a smaller deterioration to -35. "I see the slump back to -44 as a return to the original trajectory the data was on," said David Tinsley, economist at National Australia Bank in London. By 1512 GMT, the pound was down 0.4 percent against the dollar at $1.4618 after dipping to a session low of $1.4549 after the retail figures. The euro was up 1.1 percent at 92.69 pence, having slid almost 2 percent the previous day.
Sterling briefly jumped sharply however - topping $1.47 at one point - after US Treasury Secretary Timothy Geithner, responding to a question, said he was open to a Chinese proposal to enlarge the use of International Monetary Fund Special Drawing Rights.Analysts said that while markets had only shown a brief knee-jerk reaction to the potential expanded use of SDRs, more could be expected on the subject of the dollar as the worlds reserve currency.
Sterling had already been under pressure as investors reconsidered data the previous day showing a surprise jump in inflation. The unexpected rise in British consumer price inflation to an annual rate of 3.2 percent in February confounded expectations that it would ease, but has since raised fresh concerns on the potential length and breadth of the downturn.

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