The pound declined against the loonie on Friday following reports of an unexpected decline in UK retail sales in December. The GBP/CAD pair sell-off was also fueled by slightly better than anticipated Canadian retail sales data for November. Overall, the GBP/CAD pair declined from a high of 1.6685 to a low of 1.6580.
The GfK Consumer Confidence index for the UK worsened to -45 in January from -42 in December, which disappointed economists who were expecting an improvement in the GfK Consumer Confidence index to -41. The decline was driven by high inflation, which stoked up energy bills. Also, this is the first decline after three consecutive monthly increases, with the reading staying near the historical low of -49 recorded in September.
According to the data published by the ONS (Office for National Statistics), the UK’s retail sales fell by 1% m-o-m in December, following a 0.50% decline in the previous month and disappointing economists who were expecting a 0.50% growth in the reported period. At the end of December, the sales volumes were 1.70% lower than in pre-pandemic February 2020.
Non-food store sales volumes decreased by 2.1% m-o-m in December. Likewise, food store sales volumes dropped 0.30%m-o-m in the same period. The percentage of online sales declined to 25.40% in December from 25.90% in the earlier month. Furthermore, between 2021 and 2022, retail sales volumes dipped by 3% as the removal of restrictions on the hospitality sector paved the way for the resumption of eating out.
According to Destatis, the German producer price index (PPI) declined 0.40%m-o-m in December, following a 3.90% drop in November but bettering forecasts for a 1.20% decrease.
On a y-o-y basis, the PPI for industrial products surged by 21.60% in December 2022. The increase was mainly led by energy prices which shot up 41.90% y-o-y in December 2022. However, energy prices declined 1%m-o-m in December.
Furthermore, the PPI jumped 32.90% in 2022, compared with 2021.
Prices of mineral oil products rose by 17.30% y-o-y in December 2022. However, it decreased by 7.10% m-o-m in December.
Also, prices of non-durable consumer goods grew by 18.10%y-o-y in December 2022. Likewise, prices of non-durable consumer goods increased 0.50% m-o-m in December. Prices of basic chemicals, fertilizers, and nitrogen compounds increased by 23.0%y-o-y in December 2022
Similarly, prices of durable consumer goods rose by 11.9% y-o-y in December 2022.
According to Statistics Canada, the country’s retail sales fell by 0.10% m-o-m in November to C$61.80 billion, following a 1.30% increase in October and beating forecasts of a 0.50% decrease. Sales declined in six out of 11 subsectors, reflecting 47.40% of retail trade.
Food and beverage stores posted a decline of 1.60% while building material and garden equipment and supplies dealers recorded a drop of 3.80%. In volume terms, retail sales fell by 0.40% in November.
Excluding gasoline stations and motor vehicle and parts dealers, core retail sales, declined 1.10%, reflecting the steepest fall in 11 months. The decline was led by a 1.60% drop in food and beverage store sales.
Supermarkets and other grocery stores posted a decline of 1.30%. Likewise, building material and garden equipment and supplies dealers recorded a drop of 3.80%. Retail e-commerce sales fell by 3.50% y-o-y to C$4.40 billion in November, representing 6.50% of aggregate retail trade.
According to the advance estimate provided by Statistics Canada, retail sales rose by 0.50% in December.
The better-than-anticipated Canadian retail sales data is expected to keep the GBP/CAD pair range-bound with a slight bearish bias in the short term.
The historical price chart indicates that the GBP/CAD pair is declining after facing resistance at 1.6685. The next major support is anticipated only near 1.6430. Additionally, the GBP/CAD pair is trading below its 50-day moving average while the stochastic indicator is in the bearish zone. Therefore, we anticipate the GBP/CAD pair to remain in a downtrend in the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
