Pound Volatility Likely as BOE Governor Carney Opines on Brexit

TALKING POINTS – POUND, BREXIT, CARNEY, BANK OF ENGLAND

• British Pound eyes Carney testimony amid “no deal” Brexit worries
• Australian Dollar down as AsiaPac stocks follow Wall Street lower
• NZ Dollar holds up as yields and demand tick higher at bill auction

Testimony from Bank of England Governor Mark Carney before a Parliament’s Treasury committee is in focus. MPs will grill Carney and a group of BOE top brass including the central bank’s Deputy Governor Jon Cunliffe and Chief Economist Andy Haldane on the latest Quarterly Inflation Report (QIR) and press them to opine on the Brexit deal advocated by Prime Minister Theresa May.

The latest QIR marked something a hawkish shift for the BOE. Mr Carney and company will no doubt have to explain how that is reconciled with a the growing threat of a “no deal” Brexit in the event that Mrs May is ousted or MPs reject her proposal when it comes up for a vote next month, leaving little time to cobble together a replacement. The British Pound may suffer if policymakers walk back some earlier optimism.

AUSSIE DOLLAR DOWN WITH APAC STOCKS, NZ DOLLAR UP ON BILL SALE

The sentiment-linked Australian Dollar followed Asia Pacific bourses lower. Regional names slumped, picking up a negative lead from Wall Street and shedding nearly shed nearly 2 percent on average. The New Zealand Dollar managed to hold up however as yields rose despite firmer demand at an auction of 98-, 182- and 364-day bills. Tellingly a slight hawkish shift in priced-in RBNZ policy bets occurred in tandem.

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

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