January Rate Cut Odds Rise After UK Retail Sales Disappoint
Scandinavian Markets Research | Jan 17, 2020 10:43AM ET
GBP/USD was on track for a fourth day of gains on Friday, until a disappointing retail sales report brought in the bears. Retail sales is the most important indicator of consumer spending, which covers the majority of all economic activity in a country.
The Office for National Statistics (ONS) reported that December UK retail sales fell by 0.6% when compared with the previous month, marking a record fifth consecutive month of no growth. The figure widely missed analyst expectations of a 0.6% increase. In the three months to December 2019, retail sales fell by 1.0% when compared with the previous three months, the largest decline since March of 2017.
The lackluster data adds further fuel to speculation that Bank of England policy makers could reduce interest rates later this month. Adding to the case for a rate cut, the ONS reported on Wednesday that inflation unexpectedly fell to a more than three-year low in December.
Recent comments from BOE officials have indicated a willingness to cut interest rates in the event of disappointing economic data. Last Thursday, BOE governor Mark Carney said that policy makers were prepared to take action if economic weakness persists. Speaking at a BOE event on inflation targeting, he stated: “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.” The CME BoEWatch Tool currently shows a 60% probability of a quarter point rate cut. The current target rate stands at 0.75%.
Looking at the GBP/USD daily chart we can see that price is contained within a pennant pattern. Technical traders will be on the lookout for breakouts both above and below the trendlines forming the pattern. Investors now turn their attention to the ECB monetary policy statement and press conference scheduled to take place next Thursday.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.