Early week comments from BOE Governor Bailey on negative interest rates sparked a rally in Sterling, which was able to hold despite negative economic updates from the U.K. and the possibility of more lockdowns ahead.
United Kingdom Headlines and Economic data
Bank of England’s Tenreyro sets out case for sub-zero interest rates – “Monetary policy transmission have worked effectively under negative rates in other countries, with some of the evidence pointing to more powerful effects,” she said in an online speech hosted by the University of the West of England.
Johnson threatens tougher lockdown if U.K. ignores covid rules – “Britain is facing its toughest period of the pandemic, with hospital admissions up 22% in a week to more than 32,000, and the death toll now more than 80,000.”
Retail sales in 2020 worst on record, says U.K.’s BRC trade body – “Physical non-food stores, including all of non-essential retail, saw sales drop by a quarter compared with 2019,” said Helen Dickinson, BRC chief executive.
Bank of England’s Ben Broadbent says U.K. economy may be better than it looks – “GDP growth may have been the weakest on record, but retail spending growth is just about the strongest.”
“Bailey said there were “lots of issues” with negative interest rates, the merits of which are being debated by members of the Monetary Policy Committee.”
This comment reduced speculation of negative rates coming, which was likely the main driver for Sterling’s move higher on the session.
UK housing market boom starts to fade, survey shows – “The Royal Institution of Chartered Surveyors’ monthly gauge of new buyer enquiries fell in December to a seven-month low of +15% from +26% in November.”
BOE Vows to Improve its Public Explanation for $1.2 Trillion QE – “A report from the BOE’s Independent Evaluation Office published Wednesday found the central bank’s 900 billion-pound ($1.2 trillion) program has been delivered “effectively” but there were “important knowledge gaps” in its technical understanding of the tool. It also noted public grasp of the the policy was low, and there were particular concerns over its potential side effects.”