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Sterling steadies near 3-year low vs euro, eyes on post-Brexit data
[LONDON] Currency traders kept the pressure on sterling on Monday at the start of a week packed full of the first round of hard national data on consumer and corporate reaction to June's vote for Britain to leave the European Union.
The pound steadied after extending last week's fall to a three-year low against the euro in early trade in Asia, down 0.1 per cent on the day at 86.40 pence compared to the low of 86.54 pence.
Weighed down by the dramatic fall in gilt yields since the launch of a new round of easing by the Bank of England 10 days ago, it was flat against a broadly weaker US dollar at US$1.2918.
Data on Friday showed speculative positions against sterling and in favour of the greenback reaching their highest on record - pointing both to further sterling weakness but also to a risk that those positions at some stage get squeezed.
"(There is) no point over-thinking. Sterling is prone to short-covering but is also trending lower over time," Societe General strategist Kit Juckes said.
The 10-year gilt yield hit another record low on Monday after data last week showed the construction sector contracting ahead of the June referendum as well as pointing to weakness in Britain's housing market.
The first official readings of retail sales, inflation and jobs and wage data to fully reflect the period since the referendum are all due this week.
"The retail sales number will probably be the most eagerly anticipated," Craig Erlam, an analyst with retail brokerage Oanda said in a morning note.
"Should consumer sentiment hold up over the next six months, assisted by the bold moves from the Bank of England, then the UK may be able to weather the early part of the storm and possibly avoid recession."
Retail sales, due on Friday, are forecast to rise 4.2 per cent year on year, according to Reuters' polling of economists.