Yesterday Governor of the Bank of England Mark Carney spoke in Parliament regarding the latest inflation report and generally confirmed the stance that the Bank of England communicated in their policy meeting for June.
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It appears that the Governor’s preference is for stimulus (such as quantitative easing) rather than tightening (an interest rate cut) which gave sterling a minor boost in mid-morning trading, following early morning weakness across the board. Carney also commented that a response to interest rates would not be automatic if the U.K did head towards a ‘no deal’ Brexit but that this would need to be considered.
Governor Carney has never been a fan of Brexit and has remained the same since before the referendum, and a no deal Brexit would lead to a really difficult period for the Bank of England to manoeuvre through. Should they need to present further quantitative easing or have to look into rate cuts then it would be likely that either method, along with the uncertain economic picture would lead to sterling weakness.
He also added that business uncertainty was as high as it had been before the March 29th deadline and that he felt that the housing market had also been hit by this Brexit uncertainty too.
It seems that Boris is the front runner to be the next Prime Minister and he is still suggesting that he will aim to renegotiate a workable deal with the EU but failing that he would be planning to leave on 31st October without a deal.
Whether or not he will actually progress with this stance should the situation arise is hard to call, but this could equally spark a vote of no confidence for those MP’s that do not agree with this and ultimately may even end up with the U.K facing a general election.
Whilst positive news on a Brexit deal and the pound is possible , those looking to hold on may find that their wait could be still be fairly long.
“We are turning increasingly more bearish on the GBP because Brexit-induced political and business uncertainty is likely to cap any upside for the pound” say Nikolaos Sgouropoulos, a Barclays analyst.
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