Pound falls again after retail sales shock

The pound hit a nine-month low against the dollar today after a barrage of weak UK economic data and a surprise announcement from the US Federal Reserve. Sterling fell about half a US cent to $1.5345 this morning – its weakest since May 2009 – after official data revealed that UK retail sales volumes fell 1.8% in January . The fall was more than three times worse than analysts had predicted. Howard Archer, chief UK economist at IHS Global Insight, said: "Weak retail sales in January reinforce concerns that the UK economy could suffer a 'double dip' in the early months of 2010, after staggering out of recession in the fourth quarter of 2009, as some of the temporary factors that have been supporting activity are removed." The pound had already been knocked earlier in the week by poor public finance figures and rising unemployment . On Thursday, the government posted its worst January borrowing figures on record, and the day before, the Office for National Statistics revealed that unemployment had started rising again in January after falling for the two previous months. Events in the US also affected the value of the pound. The dollar gained strength after the Federal Reserve last night shocked markets by increasing the discount rate at which it charges banks for emergency loans by 25 basis points to 0.75%. By doing this, the Fed has signalled that it is ready to start normalising monetary policy. "The move last night is a vote of confidence in the US economy, which has been surprising on the upside recently, combined with continued good corporate performance during the recent results season," said Ted Scott, director of UK equity strategy at F&C Investments. Sterling is set to fall nearly 2% against the dollar this week, having retreated from above $1.58.