Pound climbs into BoE decision after Black Friday boosts retail

Sterling gained for a second day after data showed the volume of goods sold in stores and online rose 1.1% from October, the most in seven months and beating economists’ 0.4% forecast, according to the Office for National Statistics. Expectations are low for Thursday’s BoE policy statement with money markets pricing in the next interest-rate hike for November next year.

“The market is therefore too optimistic if it sees some likelihood of another rate hike before mid-2018,” wrote Commerzbank strategists including Antje Praefcke. “Sterling is likely to lose some ground again.”

Sterling rose 0.2% to $1.3447 as of 12:07, having touched $1.3466, the highest level this week. It rose 0.3% against the euro to 87.90 pence.

The BoE is likely to vote unanimously to leave its benchmark rate unchanged on Thursday, but this may mask key splits between policy makers. Investors will watch for the tone on the rate path following last month’s first increase in a decade, as well as any acknowledgment that Brexit risks have receded.

The currency climbed late on Wednesday as the dollar weakened after the Federal Reserve’s interest-rate rise, with sterling’s gains capped by political uncertainty after a lawmaker vote went against Prime Minister Theresa May.

Parliament decided to ensure it will get a vote on any Brexit deal, potentially making it more difficult for May to meet a 2019 timetable to leave the European Union, with rebel lawmakers wanting to maintain closer ties with the bloc.

The pound is likely to continue being driven by Brexit, Commerzbank said. May will be in Brussels on Thursday to call on EU leaders to agree a quick deal on a Brexit transition period, according to a senior UK government official.