The Pound exchange rate fell against the US Dollar (GBP/USD) and Canadian Dollar on Friday, after some uninspiring UK Retail Sales data. On the year, UK Retail sales slipped from 1.5% to 1.4%, despite forecasts to rise to somewhere in the region of 2.6%.
Industry experts have suggested the fall is attributed to shoppers bringing forwards their purchases to November to make the most of Black Friday offers. At a time when consumer prices are surging and wage growth is lethargic, it’s not a huge surprise to learn shoppers are changing their habits to maximise on deals; unfortunately for the UK economy, the figure shows the worst slump in five years.
Meanwhile, in the US, investors are looking forward to this afternoon’s University of Michigan Sentiment index which is pegged to climb from 95.9 to 97.0. A rise in sentiment may offer the US Dollar some opportunity to stabilise after a prolonged period of losses. The Pound has been pushing the boundaries and approaching the $1.40 level, with some specialists suggesting it’ll soon be flirting with the key psychological threshold with the possibility of moving above it.
In politics, President Trump’s first year is heating up with the possibility of his inauguration anniversary taking place during a government shut down – the first one since 2013. Meanwhile, Special Counsel Robert Mueller’s probe into Russian involvement continues.
It usually goes that when a central bank hikes interest rates, the respective currency is offered some strength; however, in recent years this hasn’t always been the case. Last year the Bank of England (BoE) hiked interest rates but with no more on the horizon, investors became disappointed and the Pound suffered as a result. This week saw something similar when the Bank of Canada (BoC) decided to increase interest rates from 1.0% to 1.25%, following two rate hikes last year. Investors were surprised by the central bank’s dovish tone about the future of further rate increases.
The BoC referenced the upcoming North American Free Trade Agreement (NAFTA) negotiations that could impact the Canadian Dollar, and if the talks don’t go well, the whole Canadian economy. The central bank said: ‘Uncertainty about the future of NAFTA is weighing increasingly on the outlook.’
The Pound to US Dollar (GBP/USD) exchange rate is trending at 1.3870. The Pound to Canadian Dollar (GBP/CAD) exchange rate is in the region of 1.7231.