Forex - GBP/USD hovering close to 7-month lows

The pound was trading near seven-month lows against the dollar on Monday as fears over the outlook for the faltering U.K. economy curbed investor demand for sterling.

GBP/USD hit 1.5438 during European afternoon trade, the pair’s lowest since July 13; the pair subsequently consolidated at 1.5486, shedding 0.19%.

Cable was likely to find support at 1.5320 the low of June 5 and resistance at 1.5507, the session high.

The pound fell sharply against the dollar on Friday after official data showed that U.K. retail sales dropped 0.6% in January, confounding expectations for a 0.4% increase.

The data fuelled concerns over the health of the U.K. economy, which contracted by 0.3% in the fourth quarter and added to worries that the U.K. may lose its triple-A sovereign rating.

Sentiment on sterling was also hit after Bank of England policymaker Martin Weale said Saturday that a weaker currency was a natural way to reduce the country’s current account deficit and that the central bank should overlook the inflationary impact of the weaker pound.

Last week’s BoE’s quarterly inflation report warned that inflation would remain above target until early 2016 and forecast weaker growth.

Elsewhere, the pound was lower against the euro, with EUR/GBP easing up 0.125 to 0.8620.

Trade volumes were expected to remain light on Monday, with U.S. markets remaining closed for the President’s Day holiday.