Wednesday saw sterling fall to its lowest levels in a month against the dollar to $1.5995 during the afternoon.The GBP/USD cross fell by nearly 0.5% over the course of the day as weak sales data released in the UK highlighted the issues still surrounding the UK economy and future growth.
The recent data release from the British Retail Consortium showed that Christmas sales hardly increased for retailers and will once again fuel speculation that the UK economy may have contracted for the final quarter of 2012.
Weak data from the UK could increase the chances of further quantitative easing from the Bank of England in coming months and could come under discussion when policymakers meet tomorrow at their monthly meeting. Today's data is unlikely to cause a knee jerk reaction though, as it is widely expected that the BoE will keep interest rates on hold and refrain from adding to the current QE programme to try and stimulate further growth.
So what next for cable?
Over the last couple of weeks we have seen a steady decline for the pound vs the dollar. The temporary package put together by President Obama and White house representatives to avoid the U.S falling over Fiscal Cliff seems to have done its job and lent some much needed support to the greenback. With the UK under threat from losing it prized triple-A credit rating (which could mean investors losing confidence in the pound) and with the euro zone crisis easing, safe haven flows into the UK are also slowing. If things continue as they are it is possible we could see rates continue to fall.
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