Sterling has dropped off over after the Bank of England kept interest rates on hold and warned about the risks of a no-deal Brexit, with the British currency initially trading higher thanks to better-than-expected retail sales and a weaker dollar.
The BoE said Brexit uncertainty had “intensified considerably” over the last month and that falling oil prices were likely to push inflation below its 2 percent target soon.
As expected, its nine rate-setters vote unanimously to keep rates at 0.75 percent. The minutes from the central bank’s meeting this week showed growing unease about chaos surrounding Britain’s divorce from the European Union, which is due in March.
As the Brexit headwinds have grown, money markets have pared back expectations for rate rises, with a 25 basis point BoE hike now no longer fully priced in until at least August 2020.
Sterling, however, earlier got a small boost from retail sales data, which showed sales volumes in November jumping by 1.4 percent from October, surpassing forecasts in a Reuters poll of economists that had pointed to a 0.3 percent gain.