GBP/CAD is declining on Friday after moving upward since Monday. Currently, the pair is trading at 1.6999, down 0.30% as of 10:34 AM UTC.
The pound started to tumble after the UK’s Office for National Statistics (ONS) released disappointing retail sales data, which might force the Bank of England (BoE) to cut the interest rates later this month for the first time since 2016.
Retail sales declined 0.6% in December in monthly terms, while analysts expected a rise of 0.5%. This was the fifth monthly decline in a row, the longest such run since the ONS started to release data in 1996. Food sales dropped by the most in three years.
Annual growth in retail sales tumbled 0.9%, while economists polled by Reuters anticipated an increase by 2.6%. The ONS also revised down the November reading. In the fourth quarter, the office said that sales volume declined by 0.1%, the worst performance in three years.
It’s worth mentioning that the retail sales survey was carried out from November 24 to December 28, which included Black Friday, Cyber Monday, and Christmas sales. Besides, the period included the national election on December 12, in which Prime Minister Boris Johnson secured a major victory and eased Brexit uncertainty.
Core retail sales both in monthly and annual terms also tumbled way below economists’ forecasts.
The fact that consumers spent less for a record fifth consecutive month is adding to concerns over the economic weakness. Consequently, the BoE might cut the interest rate at the next meeting. Thomas Pugh, an economist at Capital Economics, commented:
“December’s outright fall in retail sales, despite a potential boost from the lateness of Black Friday, does not bode well for GDP growth in December and could nudge the Monetary Policy Committee closer still to cutting rates at the end of the month.”
Nevertheless, he suggested that December might be the bottom and Johnson’s victory would refresh the economy.
The British Retail Consortium, an industry group, reported last week that sales last year declined for the first time since it started to release data in 1995.