We start the day with the pound once again on the back foot versus the euro after it fell to a one-month low against the euro on Monday as favourable rate differentials boosted the single currency and an International Monetary Fund report raised the prospect of further loose UK monetary policy.
In typical style for optimistic Sterling sellers, the bad timing of the IMF annual economic assessment has knocked the fortunes of potential gains for the pound as the report claimed that the UK economic recovery was broadly on track but more quantitative easing may be required if growth proves to be persistently weak.
Further woe was heaped on the pairing GBP-EUR when reaction to the report stunted the pound which combined with the European Central Bank will flag an interest rate hike at its meeting on Thursday, helped the euro shrug off lingering worries over Greek debt and reach session high of €1.1175.
The Bank of England meet on Thursday to discuss interest rates, and after the recent slew of lackluster data, expectations of policymakers sitting on their hands and keeping rates low for (potentially) months to come. One BoE policy maker has echoed comments from the IMF report and stated that quantitative easing may need to be looked at once more.
The European Central bank in contrast, who meet on Thursday lunchtime also, have priced in two rate hikes before the end of this year, and the powerhouse of Germany continues to grow and inflation creeps higher.
Overnight the pound has been hit from the British Retail Consortium released May’s Retail Sales Figures which showed that like for like sales in May fell 2.1%, weaker than the already downbeat number that markets had been anticipated.
Sterling sellers are now warned that markets may continue to shrink and Stop orders in the market are advised.