Sterling Halts Two-Day Rally against the Greenback as Store Prices Plunge

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Sterling Halts Two-Day Rally against the Greenback as Store Prices PlungeThe pound halted its two-day rally against the dollar as reports filtered in showing that prices of items in stores fell more last month than economists had predicted.

The sterling also plunged against 12 out of its 16 major peers despite another report showing that trade deficit shrunk in February. The International Monetary Fund also reported a favorable outlook of U.K.’s growth estimates for 2014, predicting that its economy will develop the fastest among advanced economies.

The U.K.’s government bonds declined after the Royal Bank of Canada recommended that investors should sell 10-year securities as yields are yet to fully factor in the economic growth.

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 “While data has been mixed recently, the glass is more than half full in the case of sterling,” said Peter Kinsella, a London-based senior currency strategist at Commerzbank AG told Bloomberg. “But from a trading point of view, a lot of good news is already priced in. It will take something large for the pound to appreciate further, such as the Bank of England indicating it might have to raise rates sooner than the market thinks.”

The pound was 0.1 percent down at $1.6732 as of 10:57 am in London trade. The U.K. currency had earlier hit $1.6823 on February 17, its strongest point since November 2009. The pound fell 0.1 percent to 82.44 pence a euro, after earlier hitting 82.31 pence on Tuesday, its highest level since March 6.

The British Retail Consortium –Nielsen shop-price index fell 1.7 percent in March from a year earlier. The measure had earlier plunged 1.4 percent in February.

The U.K. trade deficit shrunk to 9.09 billion pounds in February, down from January’s figure of 9.46 billion pounds, according to the Office for National Statistics.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com