Dovish BoE sends pound to fresh lows

Philip McHugh December 20th 2019 - 2 minute read

  • BoE decision weighs on pound
  • Canadian dollar weakens thanks to wage growth slowdown
  • Disappointing manufacturing performance dents US dollar

 
 
Pound extends decline 
 
GBP exchange rates extended their downtrend on the back of the Bank of England’s (BoE) December policy announcement, even though interest rates remained on hold.
 
As two members of the Monetary Policy Committee (MPC) voted in favour of an immediate interest rate cut this saw the odds of a 2020 move increase, dragging the pound lower across the board.
 
This morning’s public sector net borrowing figure could add to the bearishness of GBP exchange rates if it shows another solid uptick in new government debt.
 
With anxiety over the outlook of the UK economy lingering another sharp increase in government borrowing could give investors fresh incentive to sell out of the pound.
 
 
Stronger retail sales forecast to offer Canadian dollar support 
 
October’s average weekly earnings data weighed heavily on the Canadian dollar as wage growth eased from 4.0% to 3.3%.
 
This slowdown could encourage the Bank of Canada (BOC) to take a more dovish outlook in the months ahead, raising the risk of a potential interest rate cut.
 
However, the mood towards the Canadian dollar could recover this afternoon as forecasts point towards a solid monthly uptick in retail sales.
 
 
US dollar falters after manufacturing data 
 
Support for the US dollar faltered yesterday after the Philadelphia Fed manufacturing index slumped from 10.4 to 0.3 in December.
 
As this decline offered further evidence of weakness within the US manufacturing sector USD exchange rates were exposed to fresh selling pressure.
 
With markets wary of the potential for a weaker fourth quarter performance from the world’s largest economy the appeal of the US dollar naturally diminished.
 
Even if the final annualised third quarter gross domestic product report is unrevised USD exchange rates may struggle to find any renewed traction today.
 
 
Upcoming Data:
 
Friday, 20th December 2019
09:30 GBP Public Sector Net Borrowing
13:30 CAD Retail Sales
13:30 USD Annualised Gross Domestic Product
 
 

Written by
Philip McHugh

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