Above: Bank of England Governor Mark Carney before the Treasury Select Committee. Image © UK Parliament, Pound Sterling Live.
Governor of the Bank of England Mark Carney has given a strong hint of his approval for the Brexit deal struck between the E.U. and U.K. last week and hints he would welcome even longer for the U.K. to adjust to its post-E.U. future.
Treasury Select Committee chair Nicky Morgan MP asked the governor of the Bank of England about Prime Minister Theresa May's proposed deal and how this might impact on the objectives of the Bank.
Carney says he would "expect" that May's draft EU withdrawal agreement would "support economic outcomes" and welcomes the transition arrangements within it.
The comments were made by the Governor in front of the Treasury Select Committee's hearing into the November Inflation Report.
Carney touched on the subject of the value of the British Pound saying he believes volatility in the currency is likely to remain a feature of markets as long as uncertainty over Brexit remains.
Carney's address comes as volatility in Sterling spikes with markets buying the currency in response to news of a E.U.-U.K. Brexit withdrawal agreement being achieved only to promptly suffer a steep decline as it emerged the government might not have the numbers to get the deal through parliament.
We are seeing the Pound trading higher against the Euro, U.S. Dollar and eight of the other G10 majors at the time of writing; we can't say for certain the better bid under Sterling is a direct result of Carney's comments.
Carney says a 'no deal' and 'no transition' outcome would be the "worst outcome" for the economy.
Deputy Governor for Financial Stability at the Bank of England, Sir John Cunliffe was also testifying and reassured "it's our job to be prepared for the worst" and that people in the U.K. "can have assurance" they won't see a financial sector "meltdown" that they saw in 2008.
Nevertheless, the comments from Carney will help Prime Minister May who is looking to sell her deal to the public and who has received a wide-ranging endorsement for her plans from businesses.
Meanwhile, opponents to the Prime Minister's plans from the ranks of the Conservative party continue to struggle to raise the numbers required to stage a vote of no confidence in her leadership.
"The threat of a leadership challenge to UK PM Theresa May has receded, reducing some of the near-term volatility for GBP," says Richard Pace, an analyst on the Thomson Reuters currency desk.
The number of no-confidence letters members of Parliament have sent is thought to be short of the 48 required for a leadership challenge.
Yet even if enough are sent, 158 votes would be needed against the PM to eject her.
"Political observers suggest any challenge is probably on hold until after the parliamentary vote on the current Brexit draft," adds Pace.
We agree: if May fails to get her Brexit deal through parliament she will in all likelihood stand aside and relinquish control to a new party leader who would oversee the exit of the U.K. away from Europe under World Trade Organisation rules.
Therefore, opponents might simply be awaiting a more opportune time to take down the Prime Minister which hardly bodes well for the Pound's outlook.
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