Today's insight: Strong UK retail sales boost GBP | GBP/CAD highest since 2018

Strong UK retail sales boost GBP

Sterling is looking reasonably strong this morning after better-than-expected UK retail sales data and in the wake of the Bank of England keeping the base rate on hold. Retail sales gained 1% in the month of August which brought the annual growth rates to 2.5%; almost double the market forecast. This comes the day after the Bank of England's 9-member Monetary Policy Committee voted 8:1 To keep the base rate steady at 5.0%. The accompanying statement set a cautious tone but didn't rule out further interest rate cuts in the months ahead. These two positive news events for the UK economy and for investors in the UK have pushed the GBP/USD rate up to USD 1.3335 and GBP/EUR is also elevated at this morning's level of EUR 1.1930. In fact, sterling has made gains right across the board. A quick round-robin of the interbank market says the pound is trading at AUD 1.9550, NZD 2.1330, CAD 1.8085 and JPY 190.50.

GBP/CAD highest since 2018

As mentioned above, strong UK data has given the GBPCAD rate to the highest level since April 2018. In March and April 2018, this exchange rate spiked to higher than 1.8080 But the rate was lower than that by the end of each month. The fact that GBP/CAD didn't close the month above that level, means we chartists consider it a false break. It also means there is a real chance of seeing this exchange rate fall before the end of the month. On the other hand, if the GBP/CAD rate is above 1.80 at the close of business on the 30th of September, those same chartists will consider the resistance level to be broken and there is every chance we will see higher rates through October. If CAD buyers dare to dream of rates above CAD 1.8415, that would be higher than the March 2018 spike and the highest post-Brexit level this pair has been to. ?We are not there yet and I would urge caution of dreaming too much until this pair closes the month at higher levels and this afternoon’s Canadian Retail sales data?should show improvement, strengthening the CAD to some degree.

Today's Major Economic Releases

N/A JPY BoJ Interest Rate Decision?

N/A JPY BoJ Monetary Policy Statement?

N/A JPY BoJ Press Conference?

06:00 GBP Retail Sales (MoM)?(Aug)?

12:30 CAD BoC's Governor Macklem speech?

Interbank Exchange Rates