Sterling falls after UK retail sales plummet and investors short

Sterling extended early broad losses on Wednesday, hitting a session low against the dollar and sending the euro up past 92.50 pence after a sharper than forecast fall in retail sales highlighted a contracting economy. The Confederation of British Industry's distributive trade’s survey balance fell to -44 in March from -25 in February. Analysts had expected a smaller deterioration to -35. Sterling had already been under pressure as investors reconsidered data the previous day showing a surprise jump in inflation. The unexpected rise in British consumer price inflation to an annual rate of 3.2 percent in February confounded expectations that it would ease, but has since raised fresh concerns on the potential length and breadth of the downturn. The GBP/USD is currently trading at $1.4605 as of 8:30am, GMT.

Traders trimmed bets the euro will gain versus the dollar on speculation the European Central Bank will lower interest rates to bolster the region’s economies, options show. The euro’s one-month 25-delta risk-reversal rate against the dollar shows that premiums on euro call options over put options fell from record highs. The rate slid to as little as 0.55 percent yesterday, a one-week low, Bloomberg data show. The euro strengthened 7.4 percent against the dollar since Feb. 28, heading for its first monthly gain this year, after the U.S. central bank started buying Treasuries, raising concerns that will debase the value of the greenback. The EUR/USD is currently trading at $1.3575 as of 8:40am, GMT.

The Australian and New Zealand dollars rose as Asian stocks gained for a fourth day, fueling speculation investors will buy more higher-yielding assets. The Australian and New Zealand dollars also strengthened as Rio Tinto Group, the world’s third- largest mining company, said metals markets may recover in the second half of the year. Commodities account for 60 percent of Australia’s exports and 70 percent of New Zealand’s. “The appetite for risk is definitely back in play again for the Aussie coupled with negative U.S. dollar sentiment,” said Paul Milton, chief foreign-exchange dealer at Societe Generale Australia Ltd. in Sydney. “The Aussie and kiwi should really benefit as long as the domestic data behaves itself,” he said, referring to the currencies by their nicknames. The AUD/USD is currently trading at 0.7015 as of 8:45am, GMT.

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