Sterling hit its lowest against the dollar since July 2013 on Thursday after Bank of England Governor Mark Carney signalled he was in no rush to raise interest rates, disappointing some expectations of a hike in early 2016. Sterling fell to $1.4887, down 0.3 percent on the day against a dollar. The pound had earlier risen against the dollar after data showed that U.S. retail sales fell unexpectedly in February for a third straight month, but Carney’s comments drove sterling back towards 20-month lows in afternoon trade. Carney said he was not in a hurry to raise interest rates, and that the impact of sterling’s rise and low global inflation could last for some time. He added that the Bank expected to make limited and gradual increases in rates over the next three years as inflation returned to target within two years, even though it fell to 0.3 percent in January. The pound had been given a boost against the dollar earlier in the day after data showed the UK’s trade gap narrowed to its smallest since mid-2013 in January. A separate survey showed British house prices rose more than expected in February, suggesting a growing shortage of properties might herald the end of a slowdown in the market.
The common currency was also given a bit of a reprieve by a bounce in some euro-zone government bond yields, which hit record lows this week as the European Central Bank kicked off its 1 trillion euro bond buying program. The single currency bounced up to o $1.0613, from a 12-year trough of $1.0494. The Euro was also up against the Pound and the Japanese Yen, gaining 0.93% against the pound and 0.45% against the yen. However the common currency was still poised to drop more than 2 percent this week. Analysts said there was no specific news driving the rebound, but the pace of decline this week meant a short-term recovery had been likely. Some analysts think the divergence between ECB policy and the plans of the US Federal Reserve to begin pondering a rate rise are now priced in to markets, making a more sustained recovery in the euro likely.
The U.S. dollar nursed modest losses on Friday after investors booked profits in an extended rally that has driven the greenback to successive multi-year peaks this week. An unexpected fall in U.S. retail sales gave the market an excuse to sell the dollar, which promptly retreated from a 12-year high against a basket of major currencies. The dollar index last stood at 99.332, having slid 0.4 percent on Thursday – its biggest one-day fall in a month. The index earlier rose as far as 100.060, a high not seen since mid-April 2003. Against the yen, the dollar slipped to 121.34 yen, pulling away from a near eight-year high of 122.04. It also lost ground against the euro, which popped up to $1.0613, from a 12-year trough of $1.0494. The greenback also eased against commodity currencies such as the Australian dollar, which climbed to around 77 U.S. cents from a six-year low of $0.7561 set on Wednesday.