Forecasts for further short term Sterling weakness were halted yesterday, as it was announced that the BoE may not be lowering the interest rates on commercial banks reserves, this was coupled with an unexpected rise in CBI figures, which showed retail sales increase against consensus in September, and could continue to grow in October which helped sterling to strengthen.

“The comments are clearly aimed to lift money market rates and provide support for sterling,” but do not necessarily mean the BoE is done with measures to increase liquidity and improve broader financing conditions, said Lena Komileva, director and head of G7 market economics at Tullett Prebon in London.

Sterling’s yield appeal was helped and gave some appetite to investors, as short sterling interest rate futures contracts were sold off, this pushed up implied interest rates, and widened the yield spread.

Other data release included Current account growth, mortgage lending, money supply and consumer credit.  The data released was average and caused little volatility.

Sterling had dipped as low as $1.5768 against USD (over a 4 month low), but recovered to $1.5987, and recovered from yesterdays 6 month low against the Euro of €1.0748, reaching €1.0980, a weeks high.

At 09:30am this morning sterling was at €1.0995 and $1.6073.

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