The pound declined the most in four months against the dollar this week as a rally that made it the best-performing currency in the past year was deemed to be losing momentum.
Sterling fell below $1.70 for the first time in a month after retail sales increased less than economists forecast and comments from the Bank of England damped investor expectations for higher borrowing costs. Benchmark 10-year gilt yields dropped to the lowest in eight weeks as central bank Governor Mark Carney said this week that rate increases would be more restrained than in the past as “extraordinary forces” were still confronting the British economy.
“We have now seen the break of the psychological $1.70, which is key,” said Lee McDarby, executive director of U.K. corporate foreign-exchange sales at Nomura International Plc in London. “The retail-sales figures highlight the fact that maybe the pound has been a little bit overbought in 2014. Anything other than great news seems to be viewed as bad news for the pound right now.”