Sterling weak on slow retail sales; dollar gains despite economic news

Story link: Sterling weak on slow retail sales; dollar gains despite economic news

Sterling was weak on Thursday as retail sales in August were reported flat after a revised decline of 0.6 percent in July. These figures have triggered some speculation that the Bank of England will have to cut interest rates again in order to get consumers to spend their money.

Sterling lost 1.2 percent to $1.8058 in relation to the US dollar and dropped 0.4 percent to £0.662 against the euro.

The US dollar was stronger despite new reports on economic data that was less than positive. The New York Federal Reserve’s Empire State survey showed that conditions for manufacturers was down from +23.04 in August to +16.97 in September, but this performance was seen as a good response in light of the effects of Hurricane Katrina. Additionally, business conditions as reported by the Philadelphia Federal Reserve was down to 2.2 in September, below the level of 14 that had been forecast and even lower than the August level of 17.5.

Analysts explained that any data released in the next few weeks will be skewed by the effects of Katrina, and that the most important factor for the dollar will be what the Federal Reserve decides to do in relation to interest rates when it meets September 20.

The US dollar was up by 0.8 percent to $1.2212 in relation to the euro and it gained 0.4 percent to ¥110.55 versus the yen.

Elsewhere in Asia, the Taiwan dollar dropped to T$32.873 in relation to the US dollar even though the nation’s central bank was expected to raise interest rates, which it subsequently did, to a 4-year high of 2.125 percent.

Meanwhile, the Swiss franc lost 0.9 percent to SFr1.2672 versus the US dollar and fell 0.2 percent to SF41.5478 against the euro on a warning that growth would continue to decline in the second half of 2005.