Sterling is currently being sold off accross the Forex market as falling risk appetite dragges the risk sensitive currency lower. What is evident is the broad risk aversion in the markets at present is causing the Pound to be heavily sold against all 16 of its counterparts.

Sterling has fallen 0.7 percent to $1.6112, retreating from Wednesday’s high of $1.6275, its highest level since Feb. 3rd. The Euro has strengthened to 85.32 pence, its highest level in three weeks against the pound. The pound was further hurt by a survey showing that British retail sales growth slowed more than expected in February although firms ramped up prices at their fastest in 20 years.

The pound has rallied since the start of 2011 as rate rise expectations have gathered steam on the back of higher inflation. Investors, however, are hesitant to push sterling higher on concerns monetary tightening could threaten the UK economy’s fragile recovery. There is a lot priced into the Pound and what we are seeing is not only increased levels of risk aversion in the markets but a broad based correction.

Tom Trevorrow