Sterling tumbles as UK retail sales fall and QE may resume

Sterling weakened on Thursday against the dollar and euro after UK retail sales undershot forecasts and a Bank of England policymaker said quantitative easing could be extended if necessary. The September retail sales figures and BoE Deputy Governor Paul Tucker's comments were enough to push sterling briefly below $1.65. But the weight of bets already in place against sterling in a market still broadly bearish on the currency meant its fall shallower than it might otherwise have been, analysts said."The most important thing was retail sales but we shouldn't over-respond," said Paul Robinson, currency strategist at Barclays Capital in London, noting that retail sales are often volatile, and the annual increase was still above 2 percent. The GBP/USD is currently trading at $1.6625 as of 21:18PM, London Time.

The greenback traded lower against the euro as stocks gained on better- than-expected corporate earnings, encouraging demand for riskier assets at the expense of the dollar. The dollar may remain under pressure as the Federal Reserve trails other central banks in increasing borrowing costs. The currency will trade at $1.50 per euro at year-end, according to the median forecast of 48 analysts in a Bloomberg survey. The euro will test higher levels until it falls below a short-term support level at $1.4844, according to Jim Chorek, director of global technical strategy at UBS AG in Stamford, Connecticut. Support is where buy orders may be clustered. “I’m going to maintain a bullish stance until we take out something noteworthy on the downside,” Chorek said. The EUR/USD is currently trading at $1.5035 as of 21:21PM, London Time.

The Canadian dollar lower after the central-bank governor stepped up warnings the currency is too strong, increasing speculation that interest rates will remain low for longer than some hoped. Bank of Canada Governor Mark Carney told reporters in Ottawa that intervention to weaken the currency “is always an option.” The central bank issued a quarterly report saying the Canadian dollar “could act as a significant drag on growth,” even as it said that economic recovery is under way nationally and globally. “Carney mentioned intervention today,” said Darren Richardson, senior corporate dealer in Toronto at CanadianForex Ltd., an online foreign-exchange dealer. “Whether or not they have the ability to do that is yet to be seen. There was definitely an instant decrease in the Canadian dollar.” The USD/CAD is currently trading at 1.0470 as of 21:37PM, London Time.

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