Markets Unconvinced By BoE Smooth Brexit Assumption

May 12, 2017 Share Print 0

The Bank of England is taking it for granted that we’ll see an orderly Brexit. Investors aren’t as confident.

While Governor Mark Carney said the U.K. central bank may have to raise rates sooner than markets are expecting, he also said that’s based on new forecasts that presume a “smooth” adjustment to the new relationship with the European Union. Traders questioned the likelihood of such an outlook, and sent the pound down.

Carney’s relatively upbeat forecasts contrast to last year, when his prediction that growth would take a hit if Britain voted to leave the EU didn’t pan out. He came under fire from pro-Brexit campaigners for his pessimism. As a rule, the BOE incorporates government policy into its forecasts as it’s stated, and didn’t model the possibility of a disorderly Brexit.

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Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA

Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.