GBP/USD holds steady around 1.3375 after testing 1.3446 – BBH

GBP/USD is trading in a tight range around 1.3375 after testing an intra-day high of 1.3446 yesterday. UK retail sales unexpectedly declined in November.  Total retail sales volumes dropped -0.1% m/m (consensus: 0.3%) vs. -0.9% in October driven by reduced online demand for precious metals, BBH FX analysts report.

BOE signals gradual path for future easing

"Real household consumption growth has been stagnant in recent years. Consumption has risen by just under 1% since 2019 Q4. High interest rates have accounted for a large part of the weakness in consumption growth. As such, less restrictive BOE policy should lead to a pick-up in household spending in coming quarters."

"Yesterday, the Bank of England (BOE) delivered on expectations and voted 5-4 in favor of a 25bps rate cut to 3.75%. Andrew Bailey, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor supported a cut. Megan Greene, Clare Lombardelli, Catherine Mann and Huw Pill supported a hold."

"The BOE tweaked its easing bias to imply that additional cuts aren’t guaranteed. The BOE stressed again that the 'Bank Rate is likely to continue on a gradual downward path' but added 'judgements around further policy easing will become a closer call'. We expect GBP/USD to hold above its 200-day moving average (1.3353)."