Sterling struggled yesterday after the Bank of England warned a no deal Brexit could send the pound plunging and trigger a worse recession than the financial crisis. The BoE said the UK economy could shrink by 8% in the immediate aftermath if there was no transition period, while house prices could fall by almost a third and the pound could fall by a quarter. The analysis comes after the Treasury said the UK would be worse off under any form of Brexit. This scenario is not what it expects to happen, but represents a worst-case scenario, based on a so called "disorderly Brexit". The scenario looks at the five-year period after the UK leaves the EU. At the end of 2023, the economy is expected to resume growing.
Ms. May hit back and was quoted saying ‘what the analysis shows, it does show that this deal that we have negotiated is the best deal for our jobs and our economy which delivers on the results of the referendum. This analysis does not show that we will be poorer in the future than we are today, it shows we will be better off with this deal.
Ms. May was adamant that there will be no second referendum and emphasized that she was delivering what the people had voted for and its her job to deliver what the people wanted. Ms. May was quoted saying that this is the ‘best option’ for the UK and that it would not be possible to hold another referendum before March 29th next year. If a second referendum was held, this would mean extending Article 50, delaying Brexit or leaving with no deal.
The campaign for another referendum on the final deal has gathered pace in recent months and pressure is mounting on Ms. May from the Labour party. Labour has said it could push for another referendum if Ms. May’s deal is voted down by Parliament next month.
The greenback keeps daily gains and the consolidative mood unchanged on Wednesday following US releases and Jerome Powell’s speech. Powell went onto say that he considers the central bank’s benchmark interest rate to be near a natural level. Powell was quoted saying "Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth".
President Donald Trump stepped up his criticism regarding both the central bank and Powell, but Powell did not address Trump’s criticism and solely focused on stating that the economy is continuing to perform well at a growth rate above 4% and with inflation contained around the FED’s 2% objective.
08:00 – EUR: ECB President Draghi Speaks
19:00 – USD: FOMC Meeting Minutes