BoE warns against ‘No Deal’

With an absence of key data yesterday, the markets were relatively muted trading within a 0.5% range across the board. Sterling markets have largely flattened out in the last week as we await the next round of Brexit updates and potential further amendments to be voted in parliament on Thursday. A second meaningful vote is unlikely to take place now until March as the PM’s deal goes down to the wire.

The main news yesterday came from a speech by Mark Carney, the head of Bank of England. Carney commented on the potential economic shock that the UK would see in the event of a no deal Brexit, and urged MP’s to find a solution over the next 45 days. The BoE has already cut growth forecasts from 1.7% to 1.2% this year, at a time when China’s economy is also slowing and trade tensions are rising causing global concern. Carney advised that the huge uncertainty surrounding Brexit is causing many companies to hold off on big decisions to move the companies forward, and a number of companies are already making committed plans to move their operations overseas in case of an unfavourable Brexit outcome.

Today sees the return of economic stats starting with UK inflation data released at 9:30 am. Core Inflation is expected to drop from 2.1% to 1.9%, subsequently reducing the chances of future rate hikes, which currently are not expected for as long as 2 years. The afternoon session will see the same stats for the US announced at 1:30 pm. An expectation of rate hikes in the US has also lowered in recent months with most analysts now expecting 1 more hike in Q3 and 1 more in 2020 rather than the 2 or 3 hikes this year as previously expected.