Sterling looks to gain further

The pound moved up to a near four-month high versus the struggling euro overnight as sovereign funding worries continued to undermine the single currency, with market watchers saying that sterling could be poised for more gains.

The euro remained on the back foot with the focus on whether Portugal will be able to raise the funds in the debt market on Wednesday or be forced to turn to the European Union and IMF for financial aid.

Bond auctions in Spain and Italy will also be closely scrutinised this Thursday, as last week’s auction in Portugal was the catalyst behind this current move.

Sterling was trading up at a high of 1.2069, but closed down on the day yesterday as the euro came under broad selling pressure, but has come down a little following some overnight data in the UK.

Technical analysis also showing further room for the downside for the euro, with Commerzbank analysts highlighting potential for a move to the June 2010 high of €1.2350 being seen.

Sterling was steady for Sterling vs US Dollar yesterday, at around $1.555 in the middle of the trading session, firmly in the middle of the range of $1.5345 - $1.5680 that was set in December.

Data overnight revealed that British retail sales fell in December for the first time in April 2010 as heavy snow and concerns about the economic outlook deterred consumers during the normally busy Christmas shopping period.

The British Retail Consortium said that the value of sales dipped 0.3% in December fro a year earlier on a like-for-like basis, this follows an impressive 0.7% rise in November.

In separate news over night, the British Chambers of Commerce said a surge in demand for British exports will not be enough to stop British economic growth slowing sharply in the fourth quarter of 2010 and the first three months of this year.

The BCC, which represents firms employing around one in six UK workers, reported strong manufacturing growth but weak performance from the much larger services sector in the last three months of 2010 in its quarterly economic survey.

The remainder of the week will be fairly light data wise fro the UK, with the Bank of England MPC meeting being the exception on Thursday. Focus will fall on the European situation to establish where this market will go and as always, we will keep you updated.