Traders ignored the report, which showed that UK retail sales fell in November this year compared to October. The decline was mainly due to the more cautious approach of the British to spend due to the uncertainty associated with Brexit. Also, some upcoming parliamentary elections could have exerted some pressure on expenses. The decline in sales will have a negative impact on the economy in the future.
According to the National Bureau of Statistics, in November this year compared with October, retail sales in the UK decreased by 0.6%. Only household goods showed growth, while all other sectors showed a decrease. The agency is confident that the data fully reflect the current picture of retail sales, as the report does not reflect the volatile statistics on sales on “Black Friday”, which took place this year on November 29. Between September and November this year, sales were down by 0.4% compared to the previous three months.
However, all the attention of market participants was on today’s report by the Bank of England on interest rates and a summary of monetary policy.
As it became known, the decision fully coincided with the forecasts of economists. According to the minutes of the meeting of the Bank of England, the decision to keep the key rate at 0.75% in December this year was adopted by a vote of 7 to 2. The number of votes cast to keep the key rate unchanged was 7, while no one voted to raise the key rate. Two members of the committee voted for the demotion. Predictably, it was Jonathan Haskel and Michael Saunders who voted to cut the rate to 0.50%, citing a slowing economy and a cooling labor market.
There is talk in the market that the Bank of England is likely to lower interest rates in 2020, rather than raise them, as was stated at the last meeting. It is forecasted that the regulator will lower the interest rate by 25 basis points in May 2020.
The Central Bank said it may be necessary to lower the rate if the global economic growth continues to slow and uncertainty regarding Brexit persists. However, the regulator also did not deviate much from the previous course, noting that it is now necessary to monitor more closely the reaction of households and companies to the development of the situation around Brexit, and if the risks do not materialize, a moderate increase in the key interest rate may be required. UK GDP is forecast to grow by only 0.1% in Q4, which is below the November forecast, reflecting a higher likelihood of a hard Brexit.
The Bank of England did not forget to mention the first signs of stabilization of world economic growth, which may begin more actively after the conclusion of the first phase of the trade agreement between the US and China.
As for the technical picture of the GBPUSD pair, the pound reacted with a slight strengthening against the US dollar, but it was not possible to go beyond the side channel. The Bank of England took a wait-and-see position and did not radically revise its approach to monetary policy, which was so feared by buyers of the pound, which may support the trading instrument in the short term. The further direction will depend on how traders will act in the support area of 1.3060 and the resistance area of 1.3135. A break of 1.3060 will increase the pressure on the trading instrument and quickly push it into the area of new lows of 1.3000 and 1.2950. The option of returning to the resistance of 1.3135 is not excluded, which will hit the stop orders of sellers and throw GBPUSD higher to the highs of 1.3200 and 1.3260.
The material has been provided by InstaForex Company – www.instaforex.com
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