Sterling strengthened in European trade today as British retail sales figures for September surprised on the upside, potentially paving the way for a further interest rate rise.
Sales rose 1 per cent in September, compared to expectations for a flat figure, with mobile phone, sportswear and carpet retailers seeing strong gains. This pushed the annual rate up to 6.7 per cent, from 6.5 per cent a month earlier.
Sterling rose 1.2c to $1.8286 against the dollar on the news, a fresh two-month high against the beleaguered currency. It rose 0.2p to £0.6899 gainst the euro.
The US dollar continued its recent slide against the world's major currencies, albeit at a more modest pace. The dollar has been battered by a combination of worries over an oil-induced economic slowdown, widening federal and trade deficits and uncertainty ahead of the presidential election.
However the currency drew a modicum of support from US treasury secretary Mr John Snow, who reiterated his government's support for a "strong dollar".
US leading economic indicators fell 0.1 per cent today, the fourth straight monthly decline. The dollar was quoted at Yen 107.56 Japanese yen compared to Yen 107.53 yen before the report. The euro was quoted at $1.2603 against $1.2606 before the report.