GBP dented by Carney’s warnings of an interest rate cut

Late Tuesday night a speech by Mark Carney, BoE Governor, prompted many to raise expectations of an interest rate cut having cited that the “stance of monetary policy is tighter than intended”. The expectations sent GBP lower again when the markets opened on Wednesday.

It is now thought to be believed by many that MP’s will block a no-deal Brexit. While this sounds good news to many, it means we may have an extension to Brexit and as such most forecasts for the GBP are based on the view that Brexit will again be delayed. We could have another General Election before the end of 2019, and Jeremy Corbyn is adamant we should go back to the people and let them decide which way to go on Brexit which would mean another referendum. Either way, we are now only three months away from the deadline, still have no real progress and even have a tremendous amount of uncertainty affecting the GBP.

The economy is stalling at a critical time to the country’s diplomatic future. While the GBP has recently been dominated by politics it can’t be ignored that Q2 looks set to finish up on dismal UK growth data and with poor Economic data there looks to be minimal recovery for GBP/EUR. The UK’s services PMI fell from 51.0 to 50.2 in June, coming in weaker than consensus along with the manufacturing and construction PMIs.

“A hard Brexit or the prospect of a new election is likely to weaken the GBP further, while a controlled withdrawal or a second referendum is likely to reduce the risk premium on the GBP and strengthen it,” says Dr Richard Falkenhäll, Senior Currency Strategist with SEB

With this in mind please speak to your broker today to ensure you have plans in place to limit your exposure to any further movement in the GBP over the coming volatile months.