Rebound for sterling ‘shows market thinks Brexit can be delayed’
THE BANK of England’s Governor Mark Carney has said the pound’s rebound after the Commons vote signals market hopes that Brexit can be delayed, but warned over further volatility.
In a hearing with MPs yesterday on the Treasury Select Committee, he said financial markets also saw the prospect of the UK crashing out the EU without a deal as having waned.
However, Mr Carney said he did not put “much weight” on short-term market movements and that the market is “waiting”.
The hearing with the Bank’s Financial Policy Committee came after Mrs May’s defeat on Tuesday night, which initially sparked a steep fall in the value of the pound followed by a marked bounceback. Sterling has since held largely firm, at just under $1.29 and €1.13.
Mr Carney said the “sharp rebound” in sterling in the immediate aftermath of the vote “would appear to reflect some expectation that the process of resolution would be extended and that the prospect of no-deal may have been diminished”.
He stressed he was not giving his opinion, but the “market’s initial take”.
He added: “The markets, like the country, are looking to Parliament for direction and one would expect continued volatility.”
The hearing also looked at the risks facing the economy and strength of the financial system following the Bank’s most recent Financial Stability Report.
Mr Carney warned there was set to be a further slowdown in the powerhouse Chinese economy, but that the UK’s exposure was “relatively modest”.