Business Magazine

Carneys Warning Over Brexit Uncertainties See Pound Weakness Prevail

Posted on the 06 August 2017 by Forex News Shop @forexnewsshop

The pound continued down its slippery slope this week following the Bank of England’s Interest rate announcement and following statement. Rates remained on hold at 0.25% as many anticipated following more controlled inflation levels. However, the Pound weakness saw sterling hit lows last seen in 2011.

Carney’s thoughts on key contributors to UK economic instability

Carney didn’t delay in highlighting the uncertainty that had manifested since the UK voted to leave the EU and in particular voiced concerns over the future ties to the European union.

He also underlined how the turbulent time had meant that household spending and lack of business investment meant that growth forecasts had been revised down by the back of England; from 1.9% to 1.7%.

He also anticipated that investment in to the UK’s economy would be reduced by 20% in 2020.

Carney touched briefly on Interest rates and inflation stating that it was more than possible that interest rates would rise more than initially predicted.

Carney’s comments saw GBP being sold off immediately.

Pound weakness was seen against the majority of the majors including the US Dollar and Euro. The Pound seeing nearly a 1% drop against the troubled Dollar and a full percent against the Euro.

Summary of Pound Weakness

Many in the currency and FX industry had ear marked Thursday as an impactful day and they won’t have been disappointed.

Following Carney’s rate decision and the following speech, pound weakness was seen immediately against the Euro which appears to be the safe haven currency of choice currently. GBP/EUR moving from 1.1181 to 1.1072 with losses continuing through to Friday where GBP/EUR hit a low of 1.1047. The subsequent Pound weakness seeing GBP/EUR hit the lowest post referendum level in 7 years.

Pound Weakness GBP/EUR

GBP/USD charts told a similar story with the pound losing traction both from the Bank of England sentiment and Fridays US non farms job data which demonstrated the US’s Buoyant jobs market. GBP/USD opened the week at around 1.3117 before tumbling to a week low of 1.3026 following the Non Farms data.

Pound Weakness GBP/USD

The Week Ahead For The Pound

The next week bears only one key data release which is the monthly manufacturing figures release. Therefore, It is difficult to envisage GBP being able to recover much. Currently the GBP is looking extremely unattractive to FX dealers, data is doing little to drive rates with sentiment on Brexit and politics driving pricing.

Certain news channels had reported that a new EU referendum could be called. Elsewhere the Maltese prime minister speculated that Brexit may not happen. However, this has been swiftly dismissed by Jean Claude Juncker who stated

“My working hypothesis is that it will come to Brexit.”

Key Brexit negotiations continue in Brussels despite the summer holidays with main topics including future EU borders, passage for EU citizens and the divorce bill.


Back to Featured Articles on Logo Paperblog