The ongoing Brexit saga is taking what could be a turn for the worse following the recent resignation of British Prime Minister Theresa May. A recent article from npr.org quoted Ms. May as stating: “It is and will always remain a matter of deep regret to me that I have not been able to deliver Brexit.” May spent the better part of the last three years trying to honor the results of the historic 2016 vote to leave the EU, only to come up short despite her best efforts. Some suggested that she faced an impossible task, and now it seems as if a no-deal Brexit is becoming increasingly likely.

The potential for a no-deal Brexit could have significant implications for global financial markets. At a recent policy meeting, the Bank of England voted to hold interest rates steady at .75 percent. The meeting was the first since May and EU leaders agreed to a Brexit extension. The nine-member panel voted unanimously to hold rates at current levels, while upping its 2019 growth forecast from 1.2 to 1.5 percent. Q1 GDP growth was expected to come in higher than previous projections, and the central bank also noted better than expected growth in the U.S., Eurozone and China for its improved outlook.

In a press conference following the decision, Governor Mark Carney suggested that interest rates may have to move up faster than markets currently forecast.

Just how the no-deal Brexit could affect rates remains unclear. According to an article from which.co.uk, Governor Mark Carney said that rates could either rise or fall following Brexit depending on numerous factors. He was quoted as saying: “Since the nature of EU withdrawal is not known at present, and its impact on the balance of demand, supply, and the exchange rate cannot be determined in advance, the monetary policy response will not be automatic and could be in either direction.”

Although there is no way to determine how rates may be affected after Brexit, it stands to reason that rates could fall in order to stimulate a weakened economy. A significant decline by the pound could complicate matters further, as the central bank would be in the difficult position of having to provide stimulus while dealing with rising inflationary pressures.

An orderly Brexit could potentially see rates rise, as the central bank could turn its focus to wage growth.

It would seem that for now, the Bank of England is on hold and no major moves in rates will be seen until a deal is reached or not. With or without an orderly Brexit, however, rates may not have reason to move significantly up or down.

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DISCLAIMER: This document is issued for information purposes only. This document is not intended, and should not under any circumstances to be construed as an offer or solicitation to buy or sell, nor financial advice or recommendation in relation to any capital market product. All the information contained herein is based on publicly available information and has been obtained from sources that Straits Financial believes to be reliable and correct at the time of publishing this document. Straits Financial will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Trading commodity futures and options products presents a high degree of risk, and losses in excess of your initial investment may occur. Past performance or historical record of futures contracts, derivatives contracts, and commodities is not indicative of the future performance. The information in this document is subject to change without notice. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.The ongoing Brexit saga is taking what could be a turn for the worse following the recent resignation of British Prime Minister Theresa May. A recent article from npr.org quoted Ms. May as stating: “It is and will always remain a matter of deep regret to me that I have not been able to deliver Brexit.” May spent the better part of the last three years trying to honor the results of the historic 2016 vote to leave the EU, only to come up short despite her best efforts. Some suggested that she faced an impossible task, and now it seems as if a no-deal Brexit is becoming increasingly likely.

The potential for a no-deal Brexit could have significant implications for global financial markets. At a recent policy meeting, the Bank of England voted to hold interest rates steady at .75 percent. The meeting was the first since May and EU leaders agreed to a Brexit extension. The nine-member panel voted unanimously to hold rates at current levels, while upping its 2019 growth forecast from 1.2 to 1.5 percent. Q1 GDP growth was expected to come in higher than previous projections, and the central bank also noted better than expected growth in the U.S., Eurozone and China for its improved outlook.

In a press conference following the decision, Governor Mark Carney suggested that interest rates may have to move up faster than markets currently forecast.

Just how the no-deal Brexit could affect rates remains unclear. According to an article from which.co.uk, Governor Mark Carney said that rates could either rise or fall following Brexit depending on numerous factors. He was quoted as saying: “Since the nature of EU withdrawal is not known at present, and its impact on the balance of demand, supply, and the exchange rate cannot be determined in advance, the monetary policy response will not be automatic and could be in either direction.”

Although there is no way to determine how rates may be affected after Brexit, it stands to reason that rates could fall in order to stimulate a weakened economy. A significant decline by the pound could complicate matters further, as the central bank would be in the difficult position of having to provide stimulus while dealing with rising inflationary pressures.

An orderly Brexit could potentially see rates rise, as the central bank could turn its focus to wage growth.

It would seem that for now, the Bank of England is on hold and no major moves in rates will be seen until a deal is reached or not. With or without an orderly Brexit, however, rates may not have reason to move significantly up or down.

Stay up to date on the latest market news by signing up for Straits twice weekly newsletter here.

DISCLAIMER: This document is issued for information purposes only. This document is not intended, and should not under any circumstances to be construed as an offer or solicitation to buy or sell, nor financial advice or recommendation in relation to any capital market product. All the information contained herein is based on publicly available information and has been obtained from sources that Straits Financial believes to be reliable and correct at the time of publishing this document. Straits Financial will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Trading commodity futures and options products presents a high degree of risk, and losses in excess of your initial investment may occur. Past performance or historical record of futures contracts, derivatives contracts, and commodities is not indicative of the future performance. The information in this document is subject to change without notice. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.