Good morning.
GBP firmer for second day, but outlook remains cloudy
Yesterday was again a day of consolidation and stabilisation for the UK – the FTSE-100 recouped the losses suffered since Thursday’s vote and the pound managed to claw back further lost ground against both the US dollar and the euro. While this may look promising on a day-by-day basis, it would be unwise to pin your bets to the trend persisting with the economic and political background so uncertain at the moment.
Carney in first post-Brexit appearance will attempt to reassure markets further
We will hear from the Bank of England governor Mark Carney today who will speak at 1600BST. It’s expected that Carney will attempt to soothe and reassure markets further, stressing the fact that the bank has contingency measures and plans for this exact scenario and they will head off any fears of a liquidity crunch in credit or currency markets by providing ample funds to market makers and institutions.
While Carney’s assurances should calm those fearing financial market disintegration, the bank’s actions will not affect (and are not intended to affect) the volatility or direction of market prices. Carney is likely to warn that there is further volatility down the road as the UK enters the negotiation of the withdrawal from the European Union.
EU leaders resist UK calls for concessions on single market access
Access to the tariff-less single market has been the main talking point over the past few days and the initial noises from Brussels have been relatively abrupt: single market access is conditional on the acceptance of the free movement of labour and budget contributions. This view has been backed by a number of European leaders now, from France to Finland, in what appears to be a united front aimed at deterring any other nations from staging their own secession bids. As the UK hastily assembles their negotiating team, they certainly have their work cut out for them.
The day ahead
Q1 seems like a distant memory, and this morning’s GDP figures from the UK will be treated as such. The first glimpse of UK economic confidence in a post-referendum world will come with next week’s PMI figures, where the survey period actually covers the referendum period itself. Beyond this, the ECB minutes from their most recent meeting are released at 1230BST, where the board are likely to outline their confidence and resilience in the Eurozone economy should a Brexit vote come to pass (the meeting was held ahead of the vote last week).
Have a great day.