Pound exchange rates weakened as Carney warns UK is unprepared for Brexit

The recent downtrend in the pound continued yesterday as Mark Carney warned that many UK businesses are not ready for a disruptive Brexit.

Sterling appears to have found its feet again this morning however, with GBP/EUR stable at €1.1233, GBP/USD flat at $1.2783 and GBP/CAD muted at C$1.7002, while GBP/AUD and GBP/NZD both hold steady at AU$1.7483 and NZ$1.8620 respectively.

Looking ahead, the Eurozone’s latest CPI and employment figures are likely to be in focus this morning, with the euro poised to strengthen if unemployment fell last month as expected.

What’s been happening?                                                      

Bank of England (BoE) Governor Mark Carney left the pound on the defensive again on Thursday as he warned the UK economy was still unprepared for a no-deal Brexit.

Speaking to BBC Radio 4’s Today programme Carney suggested that ‘less than half’ of UK businesses are sufficiently prepared for a no-deal Brexit.

These remarks came hot on the heels of the BoE’s Brexit assessment on Wednesday in which the bank’s worst-case scenarios suggested that a disruptive exit from the EU could result in an 8% fall in UK GDP.

At the same time some stronger-than-expected German employment figures applied further pressure to the GBP/EUR exchange rate yesterday, with the euro strengthening as unemployment fell to its lowest levels since German unification.

Meanwhile the GBP/USD exchange rate also fell back on Thursday, despite the US dollar softening against the majority of its other peers as some analysts began to speculate the Federal Reserve may only implement one rate hike in 2019.

What’s coming up?

Markets are likely to be focused on the Eurozone this morning as the bloc publishes its latest CPI and employment figures.

The outcome for the euro may be mixed however as while Eurozone unemployment is forecast to have fallen to a new decade-low in October it may be offset by an expected slowdown in inflation.

Meanwhile, amidst a lull in notable UK data GBP investors are likely to remain focused on Brexit for the remainder of the session, likely leaving Sterling to struggle unless Theresa May makes some headway towards persuading MPs to back her Brexit deal in an upcoming Parliamentary vote.

Finally, USD investors are likely to be preoccupied by the upcoming G20 summit of leaders kicking off later today as they hope a dinner between US President Donald Trump and Chinese President Xi Jinping will help to smooth over trade relations between the two nations.