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The pound rose against a weaker US dollar this afternoon after data showed China's economy slowed less-than-expected in the fourth quarter, easing worries over the health of the global economy.
Additional data supporting the pound was released locally. This morning, figures showed that UK inflation fell sharply in December, with the annual CPI rate dropping from 4.8% in November to 4.2% in December, the largest monthly drop in three years, supporting the Bank of England's view that consumer price inflation had peaked at 5.2%. However, investors remain wary of UK economic weakness as recent data has pointed to the high risk of a recession.
Looking ahead to the rest of the week, UK labour market data tomorrow and retail sales figures on Friday could weigh on the pound further if they add to the picture of an increasingly fragile economy. Against the dollar, sterling rose 0.5% to $1.5404, pulling away from Friday's low of $1.5234, its lowest level since July 2010.
