The sterling tumbled after numbers on UK retail sales sank unexpectedly but the pound opens near one-week highs against the US dollar after dovish Janet Yellen comments.

The euro is also benefiting from a weaker US dollar while the yen is under broad pressure from elevated risk taking and higher equity markets.

However, the euro’s longer-term outlook remains gloomy following weak eurozone GDP figures and after one member of the European Central Bank discussed options for more monetary stimulus.

Any changes in the final reading on eurozone inflation could push the euro back towards a recent nine-month low against the sterling.

Sterling

Volatility in the British pound continued after poor UK retail sales hit the currency just a day after the Bank of England’s stronger growth outlook boosted demand for the sterling.

The pound gave back a portion of its earlier gains after UK retail sales unexpectedly fell 0.7 per cent (m/m) in October compared to forecasts of no change and September’s +0.6 per cent.

However, Cable shot higher, moving back above a key technical price area after comments from Janet Yellen, who is expected to take over from Ben Bernanke as the next Federal Reserve head. Yellen told US lawmakers that a fragile US economy still needs monetary stimulus.

US dollar

The US dollar is trading close to a one-week low against the British pound, falling after dovish Central Bank comments met weak US trade data and higher than forecast US weekly jobless claims figures. September’s US trade deficit widened from -$38.7bn to -$41.78, more than forecast, and comes on the back of three consecutive monthly declines in exports.

Janet Yellen testified in front of a Senate Banking Committee who verified her credentials before taking over as the head of the US Central Bank.

Euro

The euro stumbled after data showed the eurozone economy barely grew in the third quarter, moving back in the direction of a recent nine-month low against the sterling. Data showed the euro economy managed a meagre 0.1 per cent pace of growth between July and September, slower than the second quarter’s 0.3 per cent expansion.

As expected, Germany grew 0.3 per cent, down from a 0.7 per cent pace in the second quarter, but France, the bloc’s No. 2 economy, shrank 0.1 per cent after growing 0.5 per cent in the second quarter.

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