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Pound May Weaken as BOE Governor Carney Testifies on Brexit

Pound May Weaken as BOE Governor Carney Testifies on Brexit

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound may decline as Carney testifies on Brexitto House of Lords
  • Euro unlikely to find lasting cues in IFO data, Draghi comments in focus
  • US consumer confidence data, Fed-speak to inform rate hike speculation

An appearance from Bank of England Governor Mark Carney in the House of Lords is in focus in European trading hours. The central bank chief will be questioned about the consequences of the Brexit referendum and policymakers’ response to it.

The economy has proven to be somewhat more resilient than officials expected in the four months after the vote but recent worries about a “hard” break that sees the UK lose access to the EU single market have put markets on tenterhooks. The British Pound may come under pressure if Carney is pressed to expound on the policy response to such a scenario, which is very likely to beckon stimulus expansion.

Comments from ECB President Mario Draghi are also on tap and may offer another opportunity to reiterate that the central bank is not looking to taper its QE effort in the near term. The German IFO survey of business confidence is also on tap but the expected improvement is unlikely trigger a lasting response from the Euro considering such a result’s limited implications for near-term monetary policy trends.

Fed rate hike speculation will retake the spotlight later in the day as October’s US Consumer Confidence report and comments from Atlanta Fed President Dennis Lockhart cross the wires. As it stands, the markets are pricing in a 70.9 percent probability of an interest rate hike in December. US Dollar follow-through may be limited as traders await Friday’s third-quarter GDP print before showing commitment.

Where are financial markets heading in the fourth quarter? See our forecast and find out!

Asia Session

GMTCCYEVENTACTEXPPREV
22:30AUDWeekly Consumer Confidence Index (OCT 23)113.6-117.8

European Session

GMTCCYEVENTEXPPREVIMPACT
08:00EURGerman IFO - Business Climate (OCT)109.6109.5Medium
08:00EURGerman IFO - Current Assessment (OCT)114.9114.7Medium
08:00EURGerman IFO - Expectations (OCT)104.5104.5Medium
14:35GBPBOE’s Carney Appears at House of Lords --High
15:30EURECB President Draghi Speaks in Berlin --Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.08011.08411.08611.08811.09011.09211.0961
GBP/USD1.20981.21611.22001.22241.22631.22871.2350

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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