September 27, 2017 / 8:21 AM / 10 months ago

Sterling falls for a fourth day; retail data due

* Graphic: sterling and gilt yields

* Graphic: World FX rates in 2017

* Graphic: Trade-weighted sterling since Brexit vote

LONDON, Sept 27 (Reuters) - Sterling fell for a fourth straight day on Wednesday as a broad-based bounce in the dollar prompted profit taking before UK data, which will shed some light on the health of the retail sector.

The British pound rallied nearly 7 percent earlier this month, to a 15-month high above $1.3650, on rising expectations the Bank of England will raise interest rates in November. But it has come under pressure this week as expectations of a U.S. rate increase prompted investors to cut short dollar bets.

Futures markets have raised the likelihood of a U.S. rate rise by December to as much as 70 percent, compared to less than 20 percent a month ago, and overnight hawkish comments by Fed Chair Janet Yellen bolstered those bets.

Sterling was trading half a percent down against the dollar on Wednesday at $1.3395, its lowest level since Sept. 14 when the Bank of England signalled it could raise interest rates in the coming weeks.

While market watchers remain sceptical about the British economy’s ability to stomach an interest rate increase, traders said the hawkish rhetoric will have to be matched by underlying improvement in data to radically change expectations.

Data due from the Confederation of British Industry (CBI) on Wednesday will shed some light on U.K. retail sales growth in September. A Reuters poll forecast the CBI’s monthly retail sales balance at +5 compared to -10 last month.

British retail sales growth slowed in August at the fastest pace in more than a year as the squeeze on consumers from rising prices continued. (Reporting by Saikat Chatterjee; Editing by Susan Fenton)

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