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Forex News: Pound Weakens After Carney's Warning Over No-deal Brexit

Pound Weakens After Carney's Warning Over No-deal Brexit

10/17/2017 - 08:45:00 (RTTNews)

(RTTNews) - The pound declined against its major rivals in the European session on Tuesday, erasing early gains, as the Bank of England Governor Mark Carney attributed the surge in inflation to the depreciation of sterling since the Brexit vote, while warning that a failure to reach a Brexit deal with the European Union would pose risks to the Europe and not the U.K. alone.

"Inflation rising potentially above the 3 percent level in coming months is something that we have anticipated," Carney told the Treasury Select Committee.

Carney highlighted the risk of derivative contracts becoming null and void without a Brexit deal and cited concerns over cross-border insurance, saying that a hard Brexit would hurt Europe more than the UK on these issues.

New MPC members Dave Ramsden and Silvana Tenreyro expressed doubts over the possibility of an increase in interest rates in November, but Carney said a hike "may be appropriate."

The currency strengthened against its most major rivals early in the session, as the U.K. inflation improved to a 5-year high in September.

Data from the Office for National Statistics showed that inflation rose to 3 percent in September from 2.9 percent in August. The rate came in line with expectations.

The currency has been trading in a positive territory in the Asian session, with the exception of the yen.

The pound weakened to 0.8910 against the euro, after having advanced to 0.8858 at 4:45 am ET. The pound is seen finding support around the 0.92 region.

Final data from Eurostat showed that Eurozone inflation held steady in September, as initially estimated.

Inflation came in at 1.5 percent in September, the same rate as seen in August.

The pound reversed from an early high of 1.3287 against the greenback, touching a 5-day low of 1.3199. Further weakness may take the pound to a support around the 1.31 area.

The pound slipped to a 5-day low of 148.04 against the Japanese yen, following a 4-day high of 149.06 hit at 4:50 am ET. The pound is poised to challenge support around the 145.00 mark.

The pound lost 0.6 percent to hit a 5-day low of 1.2898 against the Swiss franc, from a high of 1.2980 hit at 4:45 am ET. On the downside, 1.27 is possibly seen as the next support for the pound.

Looking ahead, U.S. industrial production for September and NAHB housing market index for October are due shortly.

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