LONDON, Jan 21 (Reuters) - The pound weakened broadly on
Friday, pulling back from a 23-month high versus the euro
touched in the previous session as weakness in Wall Street
prompted investors to take profits after a rally this week.
Against a sturdy U.S. dollar, the pound eased 0.24%
at $1.3560, its lowest level in more than a week. Versus the
euro, the pound weakened 0.6% at 83.64 pence, moving
away from a February 2020 high of 83.07 pence tested on
Traders have pushed the pound higher on expectations the
Bank of England will raise interest rates as early as next month
to combat soaring inflation.
Money markets price in more than 100 basis points
(bps) in interest rate rises in 2022 and an 87% chance of a 25
bps increase in February, after data showed on Wednesday that UK
inflation rose faster than expected to its highest in nearly 30
years in December.
Another factor weighing on the pound was weak retail sales
data. British retail sales slumped in December after consumers
did much of their Christmas shopping earlier than usual in
November and many people stayed at home due to the spread of the
Omicron coronavirus variant.
"The December retail sales report is unequivocally bad news,
and it's reasonably clear that elevated price pressures in the
goods sector contributed to the retrenchment in spending," BMO
Domestic politics has not hurt the pound even as Prime
Minister Boris Johnson has fought to save his premiership in the
face of a revolt in his party over a series of lockdown parties
in Downing Street.
"The pound has not paid much heed to recent headlines
regarding the position and character of PM Johnson as this can
be explained by the fact that no general election is scheduled
until 2024 in the UK and whoever is party leader will inherit a
large parliamentary majority," Rabobank strategists said.
(Reporting by Saikat Chatterjee; Editing by Mark Heinrich and