The Pound made gains against the Euro and the Dollar as UK retail sales rose more than expected this month, but analysts are likely to remain cautious ahead of next week’s Bank of England decision amid uncertainty over whether it will increase asset purchases. Also to note the U.K. treasury are looking to sell off the ‘bad bank’ created by splitting up nationalized mortgage lender Northern Rock, but any sale was unlikely to happen for some time, a senior treasury official said Wednesday.

The Dollar declined against the Pound while making gains against the Euro supported by weak U.S. economic data that weighed on equity markets and led investors to seek safety in the greenback and cut exposure to assets perceived as risky. A report yesterday showed that US new home sales for September declined. Data also showed core US durables goods orders were better than expected in September.

The Euro declined against the Pound and the Dollar as weaker-than-expected US data prompted a sell-off in higher-yielding currencies. The single currency continues to extend its losses as it remains a proxy for risk appetite. Also to note German CPI rose 0.2% in October, bringing the annual rate up from -0.3% to 0%. State data suggested that a renewed rise in energy prices was the main driver.

Data released 29^th October 2009

UK      09.30 Mortgage Applications (September)

EU      10.00 EC Business Climate Index (October)

US      12.30 Advanced GDP (Q3)

Deflator

US      12.30 Initial Jobless Claims (w/e 24th October)