The Great Britain pound dropped today, though by now it has managed to trim losses against some of its rivals. The main reason for the decline were comments from Bank of England Governor Mark Carney that suggested a possible interest rate cut. Continuing Brexit uncertainty was also hurting the currency.
BoE chief Mark Carney delivered a speech today. While it had optimistic remarks, traders focused on negative ones. Carney said:
The pace of growth in the UK has slowed below potential, owing to the weaker external backdrop and a persistent drag from entrenched Brexit uncertainties.
He added further:
As is entirely appropriate, there is a debate at the MPC over the relative merits of near term stimulus to reinforce the expected recovery in UK growth and inflation.
And then he concluded:
With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.
As for macroeconomic data, the British Retail Consortium released its UK Retail Sales Monitor for December, which showed an increase in sales in the last month of 2019. Yet the report was not that optimistic as Paul Martin, Partner and UK Head of Retail at KPMG, commented:
At first glance retailersâ relentlessness paid off in December, with total sales up 1.9%. However, the later timing of Black Friday will have skewed the outcome. If looking at November and December combined, sales actually declined by 0.9%.
Furthermore, the whole of 2019 was terrible for retail as Helen Dickinson OBE, Chief Executive at BRC, explained:
2019 was the worst year on record and the first year to show an overall decline in retail sales. This was also reflected in the CVAs, shop closures and job losses that the industry suffered in 2019. Twice the UK faced the prospect of a no deal Brexit, as well as political instability that concluded in a December General Election — further weakening demand for the festive period.
Released yesterday, the Halifax House Price Index rose by 1.7% in December, month-on-month, almost three times the forecast increase of 0.6%. The index was up 1.0% quarter-on-quarter and 4.0% year-on-year.
GBP/USD declined from the open of 1.3094 to 1.3064 as of 17:00 GMT today but has rebounded from the daily low of 1.3013. EUR/GBP was up from 0.8477 to 0.8533 intraday before pulling back to 0.8499 later. GBP/JPY rose from 142.80 to 143.01, bouncing from the day’s minimum of 142.42.
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