Sterling was in real danger of collapse after reports suggested the biggest annual fall in retail sales in nearly three years. However, the pound was again propped-up, to an extent, by its rise to new five-week peaks against the broadly weaker US dollar. The greenback endured another day of selling-pressure after the US Federal Reserve said it planned to keep interest rates ultra-low for an extended period. The euro continued to attract demand after German consumer sentiment data beat market forecasts, Italian government borrowing costs dipped and rumours circulated that debt talks in were progressing. The yen was arguably the best performing currency though following data showing Japanese retail sales grew at their fastest pace in more than a year.
Sterling
Another disappointing domestic economic report heightened concerns the economy is set for its second recession in three years, sending the pound to January lows against the euro. The Confederation of British Industry, in its monthly distributive trades survey, reported the biggest annual fall in retail sales in nearly three years when was last in decline. Separately, the pound’s surge to five-week peaks on the US dollar was unsurprising after the US Federal Reserve had earlier pledged to support ultra-accommodative monetary policy at least until 2014.
US dollar
The US dollar ended the day higher after dropping to six-week lows against a basket of currencies as investors grew nervous over debt talks in Greece which seem to never-ending. A mixed batch of US data also prompted investors to dial back on risky bets which had been triggered by the US Federal Reserve’s earlier promise to keep borrowing costs low for an extended period.
Euro
The euro continued to attract investors, with steady demand for the single currency taking its trade weighted index to fresh five-week highs. Several better-than-expected economic fundamentals this week from Europe’s leading economy, Germany, have helped lift sentiment towards the euro.
Japanese yen
Traders had begun to question the yen’s role as a “fortress” in currency markets over the past few days after had published a shocking decline in the nation’s international trade activity. However, the yen quickly made up lost ground after data showing local retail sales grew at their fastest pace in more than a year.