Sterling bides time before retail sales data
LONDON, Oct 18 (Reuters) - Sterling steadied versus the dollar and the yen on Thursday, with investors looking ahead to UK retail sales data to gauge whether the consumer sector has weakened enough to warrant an imminent interest rate cut.
Markets got a mixed message on the likely outlook for UK monetary policy on Wednesday, with data showing above-forecast average earnings growth but minutes from the Bank of England revealing that policymakers had discussed cutting rates this month and one of them had in fact voted for such a move.
The remaining eight Monetary Policy Committee members had agreed to hold rates at 5.75 percent for now, preferring to wait for a new set of forecasts in the November inflation report.
"The subprime turmoil, the effect on the financial sector, etc, are all downside influences on interest rates on the UK. But the MPC are probably going to be unwilling to cut rates unless they are reasonably confident activity is going to slow," said Paul Robinson, currency strategist at Barclays Capital.
"I think what people are looking for is any indication that demand really is slowing, so a big downside surprise to retail sales would be more interesting than a big upside surprise."
By 0714 GMT, the pound was steady at $2.0409 <GBP=> and 237.87 yen <GBPJPY=R>. A broadly stronger euro gained 0.1 percent to 69.73 pence <EURGBP=>.
A Reuters poll taken after the BoE minutes gave a median 30 percent chance of a rate cut to 5.50 percent next month.
Retail sales, released at 0830 GMT, are seen rising 0.1 percent on the month and 5.5 percent on the year in September. Public finances data are due at the same time along with lending figures from the British Bankers' Association (BBA).
Source supplied by: Reuters