Sterling fell against the dollar on Thursday, staying under pressure after weak UK retail sales data added to concerns over a lack of growth in the economy, fuelling speculation of more Bank of England asset purchases. Retail sales suffered their biggest monthly drop in nine months in February, with further disappointment coming from sharp downward revisions to January's data.
"This data shows how little margin for error the government has to hit its growth forecasts. Markets are now starting to price in the risk of weaker-than-expected growth in the UK," said Geoffrey Yu, currency strategist at UBS. The Office for Budget Responsibility marginally revised its 2012 growth forecast for the UK up to 0.8 percent on Wednesday, but the retail sales data served as a warning to investors that this prediction may be too optimistic.
Sterling fell to a session low of $1.5770 after the data from around $1.5810. It last traded down around 0.5 percent at $1.5795. Traders said a close below the 200-day moving average around $1.5856 would open up potential for fresh falls, with this month's low of $1.5603 seen as a possible target.
The euro pared early losses to trade flat against sterling at 83.32 pence, not far from a recent one-month low of 82.83. Weak euro zone purchasing manager surveys weighed on the single currency and prevented it from taking advantage of sterling weakness. Minutes from the BoE Monetary Policy Committee meeting released Wednesday showed a surprisingly dovish slant as rate-setters Adam Posen and David Miles pushed for more asset-buying quantitative easing to try to stimulate the economy.
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