A surprise, big beat, for UK Retail Sales in November (they grew by 1.4% when expectations were for only 0.3% and putting the annual growth rate at a very healthy 3.6%) has helped the Cable rate to peak at 1.2694, so far today, below the strong resistance and psychological 1.2700 level. Intra-day support sits at 1.2640-30 ahead of the Bank of England announcement later.
BoE’s Monetary Policy Committee is concluding it’s two-day meeting, with an announcement scheduled for later today at 12:00 GMT. No policy changes are expected, and there are unlikely to be much changed in guidance so soon after last month’s quarterly Inflation Report, especially with Brexit uncertainty having put monetary policy in limbo. Regarding Brexit, all bets are off until the new year, with the UK Parliament winding down for the Christmas recess (today is the final day of debate) and with the London interbank market having entered into the year-end doldrums. The parliamentary vote on the Brexit deal and outline for a future relationship will take place in the week of January 14, before the legislated deadline of January 21. The current best guess remains that Parliament will vote down the deal and, of all the possible scenarios at that point, that a new EU referendum will be the path of least resistance. However, both sides are hardening their stances and the major parties seem to be promoting the PM’s deal (with her much hoped for “assurances” from the EU or a No Deal Brexit. The upshot is the uncertainty for Sterling, Gilts and UK Equities will persist well into the new year.
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Head Market Analyst
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