Sterling hits one-month low vs euro, extending two-week decline

LONDON: Sterling slipped to a one-month low against the euro on Tuesday, extending a two-week losing streak despite data showing Britain's trade deficit narrowed to its lowest in over a year in April.

The numbers from the Office of National Statistics, which showed Britain's total trade gap narrowed to 1.202 billion pounds in April, suggest the deficit might act as less of a brake on growth during the current quarter than it did in the first three months of the year.

But sterling was hardly moved by the data, trading down half a percent against the euro at a one-month low of 73.895 pence .

The shared currency has gained some 4.5 percent against the pound over the past two weeks, driven higher by a sharp rise in core European bond yields as well as a run of weaker-than-expected UK economic data.

Figures released last week showed growth in Britain's dominant service sector slowed the most in nearly four years in May, while inflation has turned negative for the first time since 1960, suggesting the Bank of England will hold off from raising interest rates until at least mid-2016.

But Adam Cole, global head of FX strategy at RBC Capital Markets, said sterling's recent movements seemed to be driven more by moves in the dollar and euro than worries about interest rates.

"On balance the data have been coming in marginally disappointing, but not by a strong magnitude, so it's hard to say there's a particularly strong rates story," he said. "I'm struggling to tie sterling's performance to any particular news flow; I think positioning has a fair bit to answer for."

Against the dollar, sterling was 0.3 percent weaker on the day at $1.5303.

Some analysts said the news that Britain's HSBC, the biggest lender in Europe, would shed almost 50,000 jobs and take an axe to its investment bank had also weakened demand for the pound.

Earlier, data showed British retail sales rose, helped by a recovery in the property market, but still disappointing some retailers.

"The latest BRC retail sales numbers were expected to show an improvement for May after the unexpected decline seen in April ... and did so, but the improvement was below expectations," wrote CMC Markets analyst Michael Hewson in a research note.