Sterling continues longest decline vs euro since January

Another fall for sterling yesterday puts it into its longest decline against the single currency since January.

• The euro continued to advance yesterday following a stronger-than-forecast German Ifo business morale survey, which reinforced signs that Europe’s largest economy is recovering from recession.
  
• The pound also suffered as the yield on two-year government bonds fell to a record low, making short-term British debt less attractive than its eurozone counterpart.
  
• One analyst said yesterday that with BoE so cautious about keeping rates low and the Ifo so positive, it is hard for euro/sterling not to be pushed higher.
  
• Despite the pummelling that sterling has taken this month, some market participants said that the currency may be in for a correction next month, when many traders return from holidays and more economic data reflects improvements in the UK economy.
  
• A positive CBI retail sales figure, announced today at 11:00BST, could help to slow the pound’s decline, whilst in the eurozone investors will be listening in to the preliminary CPI figures from six German states, released throughout the day.