The pound dropped for the first time in six days against the greenback, though its losses were minimized with dollar selling remaining the overall market trend.
- Initially sterling fell sharply, losing over a cent, after a ratings agency said highly-indebted Britain was the major economy most at risk of losing its triple-A rating.
- The pound retreated from a three-month high against the dollar after Fitch told Reuters Britain would have a tougher time than the United States in sustaining its fiscal deficit without impacting interest rates or the currency.
- However, sterling was able to trim its losses as strong data on UK house prices and retail sales released overnight suggested the economy was showing positive signs of emerging from recession.
- Furthermore, analysts felt that the pound had fallen in a knee-jerk reaction to Fitch’s statement and that traders pared back their sterling short positions as they realised there was nothing new in the news.
- In trading this morning, the pair is steady, currently hovering around 1.6750, as investors await important UK employment figures and the BoE’s quarterly inflation report.