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Pound Sterling Exchange Rates Recover as EU Grant Brexit Extension With Conditions

March 21, 2019 - Written by John Cameron

Pound Sterling Exchange Rates Recover as EU Grant Brexit Extension With Conditions

Today the Bank of England (BoE) left interest rates unchanged, with a unanimous vote from all nine members choosing not to change rates.

The minutes from the Monetary Policy Committee (MPC) meeting suggested that the next move of the bank largely depends on Brexit.

The MPC said that the predictions in its inflation report were conditional on a ‘smooth adjustment to the average of a range of possible outcomes for the UK’s eventual trading relationship with the EU.’

The minutes concluded:

‘The appropriate path of monetary policy will depend on the balance of these effects on demand, supply and the exchange rate. The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.
The MPC judges at this month’s meeting that the current stance of monetary policy is appropriate. The Committee will always act to achieve the 2% inflation target.’

Pound (GBP) Slips despite Unexpected Rise in UK Retail Sales

Stronger than forecast UK retail sales could do little to stop the Pound (GBP) slipping against the Canadian Dollar (CAD) at the start of Thursday’s session.

Retail sales rose by 0.4% between January and February, with year-on-year sales rising by 4%.

However, sales were considerably weaker than January’s, and the data from the Office for National Statistics (ONS) found that food sales declined.

February’s sales for food stores saw the strongest decline since December 2016, contracting by -1.5%.

Canadian Dollar (CAD) Buoyed as Face-to-Face US-China Trade Talks due to Resume

Reports emerged on Wednesday that US and China were set to resume face-to-face trade discussions which likely buoyed the Canadian Dollar (CAD).

It has been suggested that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are due to fly to Beijing next week to meet with Chinese Vice President Liu He.

Meanwhile, US President Donald Trump warned that the US may leave tariffs on Chinese goods for a ‘substantial period’ despite Chinese Officials pressing for a full lifting of trade tariffs.

When questioned about lifting tariffs on Chinese goods, the President responded:

‘We’re not talking about removing them. We’re talking about leaving them for a substantial period of time because we have to make sure that if we do the deal, China lives by it.’

Pound Canadian Dollar Outlook: Will the GBP/CAD Exchange Rate Slip on Strong Canadian Retail Sales?

Looking ahead to tomorrow, the Canadian Dollar (CAD) could rise against the Pound (GBP) following the release of January’s monthly retail sales figure.

If Canadian retail sales rise by 0.4% as forecast, it could increase sentiment in the ‘Loonie’.

However, the Bank of Canada’s (BoC) Consumer Price Index (CPI) for February may offset any gains made by a rise in retail sales.

If Core CPI rises at an annual rate of 1.2% compared to the previous reading of 1.5%, it could cause the Pound Canadian Dollar (GBP/CAD) exchange rate to rise.

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