httpvh://www.youtube.com/watch?v=3AOmiD0ddyM

Sterling was kicked higher by a more hawkish set of Bank of England minutes yesterday only for it to lose its momentum in the afternoon trading session.

While last week’s Inflation Report was seen as being particularly dovish we have to remember that it was delivered, and followed up in the Q&A session by, Mervyn King. He is one of the largest doves on the committee and thus proceedings had a certain tone. The combined voice of the rest of the MPC, including perma-hawk Andrew Sentance, was more circumspect and the minutes reflected arguments for further loosening or tightening of monetary policy here in the UK.

As a result of this GBP leapt higher from an overnight position where it had tested the 1.54s back towards 1.57 against the US dollar while it climbed back above 1.21 against the euro. It did lose these levels after lunch as traders seem to want to push the pound back towards the 1.50 price and the data spike giving them an advantageous level from which to do so.

The euro seems to be waiting for something however. For the past 4 or 5 days it has traded in a 100 pip range give or take against the USD and has done so through some dicey data and important announcements. What does this mean? Well, like a puff adder, cobra or other savage beastie it looks coiled ready to pounce. Where however is the question. Damned if I know but a test of 1.25 is not out of the question and would make sense given our downward prediction for cable.

The largest hurdle for sterling today is the UK retail sales figure at 09.30. We think that we will see a poor figure here with a post World Cup slowdown and fears over austerity measures due in the October spending review. US data comes in the form of initial jobless claims at 13.30 and leading indicators at 15.00.