Sterling oscillated between positive and negative territory against the US dollar after Bank of England policymaker Martin Weale announced that he had abandoned his call for an interest rate increase this month, because the UK economic outlook weakened amid the risk of contagion from events in Europe and the US.

He further announced that he does not think that quantitative easing is required at this point in time, and that the lower oil prices could lead to a drop in inflation. Today the UK also released its CBI survey, which revealed that British retail sales fell at their fastest pace in over a year, underlying the fragility of the UK economic recovery. CBI distributive trades declined 14% this month compared to a 5% drop the previous month. US jobless data released this afternoon showed that the latest initial claims figure rose this week to 417,000 compared to 408,000 the prior week.

With the release of the worse-than-expected data, investors are now placing a greater bet that Federal Reserve Chairman Ben Bernanke will use his speech tomorrow at Jackson Hole to signal further monetary stimulus to prop up the US economy. Tomorrow, markets will also see the release of UK and US GDP data. By 2.30pm (London time) GBP/USD was trading just 0.02% higher at $1.6365.