Carney Warns Of “Economic Shock” From No Deal

Speaking to members of parliament in the UK yesterday, BOE governor Mark Carney delivered a more balanced message than what we have recently heard.

While on the one hand, the governor reaffirmed the risks around a no-deal Brexit, this time Carney tempered his warnings with some positive perspectives around the potential for free trade deals in the aftermath of Brexit.

Commenting on the progress of Brexit negotiations, Carney said that “it is in the interests of everyone, arguably everywhere” to find a Brexit solution.

He added that the “economic shock” from a no deal Brexit would be crippling given the current context of falling world trade and a slowing down of the Chinese economy.

“High Levels of Uncertainty”

In terms of the negative impact from Brexit, Carney said that it had fuelled “high levels of uncertainty” with companies “holding back on making big decisions”. He added:

“A no-deal would be an economic shock for this country, and this would send a signal globally about re-founding globalization.”

Carney feels that sending this signal “would be unfortunate.”

However, he also stated that Brexit could deliver some positives too saying:

“It is possible that new rules of the road will be developed for a more inclusive and resilient global economy,”

Adding that Brexit is an “acid test” for the future of global trade.

Technical Perspective

GBPJPY Remains within the bearish channel that has framed price action since early 2018. After piercing below the structure briefly at the start of the year, price has since traded back up into the middle of the channel and, for now, is trading between support at the 139.90 level and resistance at the 144.85 level. A break of this upper level will bring a test of the channel top into focus.