Sterling extends gains on strong retail sales before BoE meeting

LONDON: Sterling gained on Thursday, helped by better-than-expected retail sales numbers and a broadly weakened dollar as traders position ahead of a Bank of England interest rate decision.

Analysts put most of the pound's rise down to dollar weakness, with the U.S. currency struggling after the Federal Reserve struck a more dovish tone on monetary policy than in previous months and investors grow increasingly concerned about an economic slowdown in the United States in 2019.

But sterling did get a small boost from the 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.

Worries about Prime Minister Theresa May's ability to win parliamentary approval for her Brexit deal in January continue to overshadow trading of the pound, and will almost certainly keep the BoE from changing its monetary stance.

"No policy change is expected, which isn't too surprising given the current Brexit uncertainty, though this morning's November retail sales numbers have shown that the UK consumer is still alive and well despite two months of negative readings," said Michael Hewson, an analyst at CMC Markets.

The BoE rate decision is due at 1200 GMT.

Sterling, already up more than half a percent, rose as much as 0.7 percent after the retail data release to hit $1.2693 , a two-day high.

Against the euro, the pound rose 0.2 percent after earlier trading flat to 90.085 pence per euro.

"With Britain facing unprecedented economic uncertainty as Brexit approaches, the last thing the Bank would want to do is add to people's worries," Marshall Gittler, chief strategist at ACLS Global said.

"In any case, following yesterday's inflation data, which showed inflation slowing as expected, it would be hard for them to take a more hawkish stance...I expect them to be relatively dovish in the face of such uncertainty, which may cause the pound to weaken even further."