* Sterling loses 0.4 percent versus dollar
* Seen vulnerable to drop beyond $1.60
* Weak consumer spending adds to run of poor UK data
* Focus on BoE, ECB meetings on Thursday
By Jessica Mortimer
LONDON, Jan 8 Sterling fell against the dollar
on Tuesday and was vulnerable to further falls after a weak
retail sales survey added to concerns about faltering UK
The pound weakened 0.4 percent versus the dollar to
$1.6041, edging close to the $1.6010 level hit on Friday, its
lowest in nearly a month, and staying well below last week's
16-month high of $1.6380.
More falls could push it towards the Dec. 10 low of $1.5999
and then the 200-day moving average at $1.5902.
Data from the British Retail Consortium showed retailers'
Christmas sales barely rose, reinforcing concerns the economy
may have contracted in the fourth quarter of
It followed on the heels of a purchasing managers' survey
last week that showed activity in the UK economy's dominant
services sector slowed by its biggest margin in two years in
"Today's moves are still reflective of what happened last
week after the weak services PMI, which has kept sterling under
pressure," said Richard Driver, analyst at Caxton FX.
"Sterling's shelf life above $1.60 is limited," he said,
adding it could drop towards the mid-November low of $1.5828
over the coming weeks.
Weak UK data will increase concerns about the possibility of
more monetary easing from the Bank of England in the months to
come and about the risk of the UK losing its prized triple-A
The Bank of England is scheduled to announce its latest
policy decision on Thursday, although it is widely expected to
hold interest rates and not make any additional asset purchases
to stimulate the economy.
"The specific focus for sterling is how early indications
for Q4 (2012) and Q1 (2013) GDP look," said Adam Cole, global
head of FX strategy at RBC Capital Markets.
Citi analysts, in a note to clients, said a
weaker-than-expected economic recovery and subdued inflation
pressure could prompt the BoE to restart its asset purchase
programme after the release of its quarterly Inflation Report
next month. That would add pressure on sterling.
The pound was also dragged lower with the euro, which
weakened against the dollar as investors looked ahead to a
European Central Bank meeting on Thursday, when policymakers
could hint at future interest rate cuts.
The euro edged up 0.1 percent to 81.46 pence,
pulling away from a three-week low of 80.86 pence hit last week.
Analysts said a weak UK economy could harm the pound's
reputation as a relative safe haven during times of heightened
concern about the euro zone debt crisis, especially if there is
a growing risk of the UK losing its top-notch credit rating.
"People have ended up buying sterling thinking it is a
safe-haven currency but I think people haven't looked enough at
the fundamentals," said David Bloom, global head of FX strategy
at HSBC, adding that the perception of the UK as a safe haven
"I think the UK will lose the battle of the uglies this year
... we don't think the fiscal situation looks good."
Bloom expected sterling/dollar would fall to $1.52 by
year-end, while euro/sterling should rise to 88 pence.
An earlier survey showing improved business morale in the
last quarter failed to lift the pound. Another poll showed UK
inflation expectations dipped in December but remained
relatively high at 2.7 percent.