GBP/CAD: Pound Advances as BoE Leaves Rates Steady

GBP/CAD was trading very close to December lows, but the pair is on the rise right now, after the Bank of England (BoE) left the interest rate unchanged. Currently, one British pound buys 1.7185 Canadian dollars, up 0.23% for the day as of 11:25 AM UTC.

Just recently, the BoE kept the rates at previous levels, saying it was too early to assess the positive impact of Prime Minister Boris Johnson’s victory in the UK election last week. The Brexit optimism deteriorated after the PM said he would rule out any attempt to extend the transition period beyond December 2020.

As expected, two of the central bank’s policymakers voted to cut borrowing costs for the second month in a row. They cited a weakening job market. Nevertheless, seven Monetary Policy Committee (MPC) members decided to take a wait-and-see approach. The central bank said in a statement:

“There was no evidence yet about the extent to which policy uncertainties among companies and households had declined following recent domestic policy developments.”

The pound couldn’t move higher because of disappointing retail sales data. Earlier today, the Office for National Statistics (ONS) said that retail sales grew in November at their slowest annual pace since April last year.

The ONS said that the indicator slowed down last month to 1%, from 3.1% in October. Economists surveyed by Reuters expect a smaller deceleration, to 2.1%.

Retail sales had been significantly contributing to the UK’s gross domestic product (GDP) since the Brexit referendum in 2016.

In monthly terms, the indicator fell 0.6% from October. Thus, it has failed to show a monthly gain for the fourth straight month, which is the longest run in over 23 years.

Rhian Murphy of ONS commented:

“All main sectors saw their sales fall with the exception of food stores.”

A separate report from the Confederation of British Industry (CBI) showed that retail sales stabilized in December after several negative months.

CBI chief economist Rain Newton-Smith explained:

“While stagnating sales volumes in December are hardly something to cheer about, the figures at least provide hope that the recent period of falling sales has passed.”

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