Mixed messages may delay very near-term sterling weakness

The GBP retraced all of its post-BoE losses last week despite weaker-than-expected September wage growth. Looking ahead, this GBP strength is unsustainable in the context of fiscal and monetary policy headwinds, as well as impending EU referendum risk, which is beginning to attract market attention.

Lower-than-expected UK CPI inflation data (Tuesday; consensus: -0.1%) may act as a catalyst for sterling weakness this week, but it is believed that above-consensus October retail sales (Thursday; consensus: -0.5%) may delay very near-term sterling weakness.