Sterling found itself on the back foot yesterday more or less across the board. This came despite very strong retail sales figures which rose well above expectations for November. The results beat analysts’ best forecasts by a full 2%, with the published reading coming in at an overall 5% for the month.

The devaluation of the Pound came predominantly as a result of events in Brussels and weakening expectations around an interest rate hike from the Bank of England. The Prime Minister, David Cameron, was in Brussels to lay out plans for modifications of the current EU-UK relationship. The main talking point from this was that Mr. Cameron wishes to prevent ‘benefit tourism’ by stopping migrants from claiming benefits until they have been a UK resident for a minimum of 4 years . This is something of a sore point for the likes of Germany and France.

GBP/USD losses extended to an 8 month low, however, the test of the lower ends of the trading range found some buying interest which has stemmed the losses for now. Many feel that Sterling will continue to falter as we move into the new year and should the current ‘Brexit’ calls continue, it will add further negative pressures to Sterling’s cause.

Since Wednesday evening’s interest rate decision, the US Dollar has continued to gain strength, and now eyes possible 1.48 levels against Sterling. The pair did actually touch 1.4865 interbank, but relinquished those gains overnight. However, technical analysts are expecting the pair to re-test this barrier as it becomes apparent that the US is the only major economy that is now in the midst of a rate hiking cycle. As the Fed's policies become ever wider against the European Central Bank’s and investors flock towards the Greenback, EURUSD outlook remains bearish.

Weekly jobless claims were better than expected - they fell to 271K in the week ending on December 11. However, the manufacturing sector is still unable to give strong signals as the Philly FED index came out at -5.9 for December, against previous 1.9.

Data to watch: 2.45pm US Markit Services PMI & Composite PMI.