Tag: Neil Mellor

The pound slid to lead losses among major currencies on Tuesday as U.K. Prime Minister Theresa May’s fate hung on the line over her Brexit plans. Sterling headed for a two-week low as May risked a defeat in Parliament later Tuesday over customs arrangements and Bank of England Governor Mark Carney warned of economic pain if the U.K. failed to secure a trade deal with the European Union. While lawmaker tensions over Brexit have been simmering for months, traders are focused on the possibility of a leadership challenge for May, which some strategists say could drive the currency down 5 percent. Pound traders have been caught in recent months between two competing forces, with positive noises on an interest-rate hike from the BOE drowned out by concerns over Brexit. May narrowly avoided a defeat in Parliament Monday by making concessions to those in her party pushing for a clean break with the EU, infuriating pro-EU rebels and provoking another rebellion. Gauges of volatility in the currency, which have been subdued in recent months, climbed on Tuesday. “The political backdrop in the U.K. could well be a source of disruption to market equanimity over the summer months,” wrote Bank of New York Mellon Corp.’s senior currency strategist Neil Mellor in a research note. With the U.K. government facing tough choices on whether to extend the Brexit process or even hold a fresh referendum, “the mood music on the economy might therefore prove to be important.” With politics becoming increasingly hard to predict, investors may be opting to focus on the central bank to guide their bets on the U.K. currency. The market currently prices a more than 80 percent chance that the BOE will raise rates when it meets next month. If the U.K. fails to get a deal with the EU and instead trades with it under World Trade Organization rules, that potentially presents a “financial stability event” for both Britain and the bloc, the BOE’s Carney told lawmakers on Tuesday.