LONDON - Sterling hit a two-month low against the dollar on Thursday after a surprising fall in UK retail sales suggested consumer demand remains sluggish and would keep the British economy weak.
The pound extended losses against a broadly stronger dollar, which shot to a three-month high against a currency basket as investors wound up short positions in the U.S. currency before closing their books for year-end.
Government figures showed UK retail sales volumes fell 0.3 percent on the month in November, confounding expectations for a rise of 0.4 percent.
Sales dropped at their fastest pace since May, while data from October was revised up to show growth of 0.6 percent from an earlier 0.4 percent estimate.
"There had been speculation the figures were going to be better than expected, so the announcement disappointed the market," said Paul Robson, strategist at RBS in London.
Other sales data was less negative, with the UK CBI retail sales balance coming in at +13 in December, unchanged from the previous month and higher than expectations.
By 11:05 a.m., sterling had fallen roughly 1.5 percent to $1.6080, its weakest since October 15.
The pound fell nearly 1.5 cents following the weak sales figures, and was poised to clock its worst daily performance in around two months.
Sterling reversed a climb to a one-week high against the dollar on Wednesday following surprisingly upbeat UK employment data.
The euro traded 0.2 percent higher at a session high of 89.19 pence hit in the aftermath of the UK data.
