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March 2016

Brexit could bring “challenges to financial stability”

Published: Tuesday 08 March 2016

The main event of today was the Governor of the Bank of England, Mark Carney, testifying at Parliament’s Treasury Committee.  The focus was clearly on ‘Brexit’ and what the stance of the Bank of England would take surrounding the Brexit dilemma.  Mr. Carney emphasized that the Bank was not taking sides yet this was not received well by a certain Conservative Eurosceptic MP Rees-Mogg who accused Carney of being pro-EU and comments of being ‘beneath the dignity of the Bank.’ 
 
Nevertheless, Carney did say that an exit was the biggest domestic risk to financial stability within UK.  Carney went on to say that the short-term impacts of a ‘Brexit’ could affect investment and household spending. When speaking about long-term implications, Carney didn’t give a view ‘because it’s outside of their remit’ and that the Brexit could bring ‘challenges to financial stability.’
 
As a result, we’ve seen the Pound weaken across the board.
 
The focus for the rest of the week will be tomorrow’s UK manufacturing production data followed by Thursday’s ECB press conference where Mario Draghi is widely expected to increase QE and cut interest rates.  We should certainly see some volatility on the back of this and hopefully the Pound can regain some ground against the Euro. 

Latest FX news by Joe De Berniere

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