GBP/CAD continues to decline after tumbling 0.85% yesterday. Currently, the pair is trading at 1.7058, down 0.10% as of 10:55 AM UTC.
GBP/CAD – Pound Cannot Leverage Retail Sales Data
The sterling showed some signs of bullishness after the Office for National Statistics (ONS) reported upbeat retail sales data earlier today, but the currency couldn’t maintain the pressure and the Loonie has proved to be much stronger today, also driven by a spike in Canadian inflation.
UK shoppers have become more willing to buy in January after the hesitation at the end of last year, which proves that the December election unleashed the confidence.
The ONS said that retail sales rose 0.9% in January after a monthly decline of 0.5% in December. Analysts expected an increase of only 0.7%.
The surge was even more evident in the core retail sales, which excludes fuel sales. The indicator rose 1.6% on the month, which is the best performance since May 2018, beating economists’ expectations of a 0.8% rise.
Sales at petrol stations tumbled by 5.7% last month, which is the biggest drop since 2012. The ONS said that the drop was caused by higher fuel prices.
The latest retail sales data proved the Bank of England right when it left the interest rates unchanged in January. However, the rebound might not be sustained. Earlier today, separate data showed that employers offered the weakest annual pay offers in over a year during the previous three months. Perhaps this is why the investors’ confidence in a potential GBP rally faded very shortly.
Canada’s Inflation Beat Expectations
The Loonie remains bullish after Statistics Canada said yesterday that the country’s annual inflation had increased to 2.4% in January, while analysts expected a rate of 2.3%. Without considering gasoline prices, the annual inflation rose 2.0% last month.
The upbeat inflation data will make it difficult for the Bank of Canada to seek an interest rate cut in the case when it feels necessary to support the economy.
Doug Porter, chief economist at BMO Capital Markets, explained:
“It gives the bank a bit of a challenge if they want to cut rates. It’s not a straightforward case like in the U.S. when their measure of core inflation was stuck well below 2%.”
