Underlying Sterling confidence will remain weak even with the potential for an initial corrective recovery.
Sterling has remained under pressure over the past 24 hours as fundamental concerns increased. The UK currency weakened to four-month lows near 1.9810 against the dollar and also dipped to test November lows around 0.7240 against the Euro before a corrective recovery on Friday.
Following the wider current account deficit and weaker government borrowing data, overall confidence in the economy is liable to remain weaker. There will be fears that there will need to be a substantial currency correction weaker in the medium term to help correct imbalances, especially with the current account deficit as a proportion of GDP wider than in the US for the third quarter.
The latest retail sales data was slightly above expectations with a 0.4% increase for November with the annual increase holding steady at 4.4%. This will ease pessimism to some degree, although overall confidence is likely to remain weak and services-sector growth also slowed. Consumer confidence also continued to deteriorate in December with a drop to -14 from -10 the previous month