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Pound Nosedives As BoE Governor Carney Hints At Rate Cut

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The pound fell sharply against its key counterparts in the European session on Thursday, after the outgoing Governor Mark Carney signaled that an imminent interest rate reduction is on the cards, if weakness in the U.K. economy persisted.

Speaking at a BoE event in London, Carney said that the pace of growth in the UK has slowed below potential and inflation is below target. "There are downside risks from global growth and the possibility that uncertainties over future trading relationships could remain entrenched," he said.

"With the relatively limited space to cut bank rate, if evidence builds that the weakness in activity could persist, risk management considerations would favor a relatively prompt response."

Regarding asset purchases, Carney said that there was sufficient headroom to at least double the £60 billion scheme of August 2016. That would deliver the equivalent of around a 100 basis point cut to the bank Rate. Forward guidance at the effective lower bound adds to this armory, he told.

"All told, a reasonable judgement is that the combined conventional and unconventional policy space is in the neighborhood of the 250 basis points cut to Bank Rate seen in pre-crisis easing cycles," Carney said.

In economic releases, data from the British Retail Consortium showed that UK retail sales for 2019 was the worst on record.

Combined retail sales for November and December decreased 0.9 percent. Like-for-like sales fell 1.2 percent.

The currency was trading stronger against its most major counterparts in the previous session, as investors cheered U.S. President Donald Trump's tempered response to an Iranian missile attack.

The pound was 0.7 percent lower at a 3-day low of 0.8533 against the euro, following a gain to 0.8471 at 1:00 am ET. At Wednesday's close, the pair was worth 0.8479. Extension of the pound's weakness may lead it to a support around the 0.88 region.

Data from the Eurostat showed that the euro area unemployment rate remained unchanged at the lowest rate since 2008 in November.

The jobless rate came in at 7.5 percent in November, the same rate as in October. The rate came in line with expectations.

The pound lost 0.8 percent to nearly a 2-week low of 1.3013 against the greenback, after rising as high as 1.3124 at 1:00 am ET. The pound-greenback pair had finished deals at 1.3093 on Wednesday. Should the pound falls further, 1.28 is possibly found as its next support level.

After rising to a weekly high of 143.46 at 1:00 am ET, the pound pulled back 0.7 percent to 142.43 against the yen. The pound was trading at 142.84 per yen at yesterday's close. The pound may seek support around the 140.00 mark.

The GBP/CHF pair shed 0.9 percent, falling to 1.2672. This followed a high of 1.2785 it marked at 1:30 am ET. At yesterday's close, the pair was quoted at 1.2752. Further decline in the currency is likely to locate support around the 1.24 area.

Data from the Federal Statistical Office showed that Swiss retail sales remained stable in November.

The working-day adjusted retail sales remained unchanged in November, after a 0.4 percent rise in October.

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