Mark Carney, the Bank Governor , said “The UK is in a time of uncertainty and significant economic adjustment.” The BoE was in the process of building bank balance sheets but have now had to reverse their policies. They will reduce the amount of capital that banks must hold by £5.7 billion. This will raise the banks’ capacity to lend to UK households and businesses by up to £150 billion.
The efforts of the Bank of England will not be able to fully and immediately offset the market and economic volatility. Mark Carney, the Bank Governor, also agreed to a potential possibility of recession, depending on how the country deals with this period of uncertainty. He also noted that the future for jobs, wages and wealth would be determined by major decisions made by other officials and private companies.
The BoE committee said it is monitoring closely any further drop in investor interest for UK assets. This is important as it is likely Brexit will stop investors from financing the UK’s near-record current account deficit. It comes as no surprise that this is a key focus for the committee as news comes that Aviva Investors suspended trading in a 1.8 billion-pound real-estate investment fund, a day after Standard Life Investments froze its 2.9 billion-pound fund following an increase in redemption requests.
Today the EUR/GBP pair remains above the 85p level. Meantime, EUR/USD has mostly traded in a tight range within the $1.10-1.11 band. Looking ahead to today, the ECB meeting ‘account’ will be worthy of attention, as markets speculate on whether the ECB may ease policy again sooner rather than later. Datawise, the main releases are in the UK, with house prices and industrial output, both May, due for release. Overall, with Brexit concerns remaining at the forefront of market attention, investor sentiment and sterling remain vulnerable.
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