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The MPC minutes will support Sterling in the short term, but the retail sales data on Thursday will represent major event risk

Sterling pushed to highs near 2.0080 against the dollar in Europe on Tuesday before weakening sharply to lows just below 1.99 as the US currency rallied. The UK currency secured a firmer tone against the Euro with gains to 0.7925.

The latest minutes recorded that the Bank of England MPC committee voted 7-2 for unchanged interest rates in July with Blanchflower voting for a cut while Beasley voted for an increase due to the need to control inflation expectations. The minutes will provide some near-term Sterling support on yield grounds, especially as there was little apparent discussion of a cut in rates.

There will still be apprehension over the latest retail sales data which is due for release on Thursday, especially as there will be expectations of a sharp decline following the surprise surge in sales last month.

There will be some Sterling support from an easing of immediate fears surrounding the global financial sector and renewed interest in carry trades while increasing fears over the Euro-zone will also provide a degree of protection.

Following the MPC minutes, Sterling strengthened to test levels beyond 0.79 against the Euro.

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