The British Pound’s remarkable 11-day sequence in which it never tested the previous day’s low against the US Dollar was good while it lasted, but has now come to an end. At one point, GBP/USD was almost 9 cents higher than its starting point of 1.3460 on January 11th having reached a best level last Thursday around 1.4330. Yesterday it didn’t just break below Friday’s low of 1.4145, but traded all the way down to 1.4035; the first ‘down day’ for the GBP in 2½ weeks. Overnight in Asia, the GBP has remained pressured and a break through yesterday’s low would open up 1.4000 then 1.3925.
A confidential government analysis of the economic impact of Brexit was reported to have been shown to Cabinet Ministers over the weekend, though in order to minimize the risk of leaks, hard copies were not made available. Needless to say, the assessment duly appeared on the internet overnight. The Times today reports that under a comprehensive free trade agreement with the EU, British growth would be 5 per cent lower over the next 15 years compared with present forecasts. The “no deal” scenario, which would mean Britain reverting to World Trade Organisation rules, would reduce growth by 8 per cent over that period whilst the softest Brexit option of continued single-market access through membership of the European Economic Area would, in the longer term, still lower growth by 2 per cent.
Bank of England Governor Mark Carney is due to give evidence to the House of Lords Economic Affairs Committee at 3.30pm this afternoon. During his Q+A session at Davos last week, he attempted to quantify the loss of GDP which resulted from the EU referendum result 18 months ago and might well come in for some tough questioning over this. Amidst all the intrigue, the GBP opens this morning in Europe at USD1.4020, GBP/AUD1.7395 and GBP/NZD1.9185.