Pound seeks direction as expectations of no deal rise

Given the wild swings seen across several markets of late the pound has been relatively sanguine with the currency treading water around recent lows. According to a Reuters poll of economists the chances of a no deal Brexit have risen to 35% - up from 30% for the previous month and the highest probability for this outcome since the question was first asked 2 years ago. With the UK parliament expected to remain in recess for almost another month there's unlikely to be any moves to block a no deal anytime soon and the latest news has focused on whether these attempts would prove futile anyway. The pound has been in a pretty narrow range of just over 1% against the US dollar for the past week and the markets are clearly taking stock of the recent declines before embarking on the next move.

US ready with "pen in hand"

In the absence of any tangible developments in the past few days, the main Brexit related headlines have focused on what could cynically be described as empty rhetoric, with government aide Dominc Cummings proving typically controversial and taking most of the focus domestically. Comments from Mike Pompeo, the US Secretary of State, that the US stand ready with a pen in hand to sign a new free trade agreement at the earliest possible time no doubt sound promising but it remains unknown when this actually would be.

The Bank of England is expected to buck the growing trend amongst global central banks in holding off on any easing of policy at their next meeting with markets giving around a 5% chance of an interest rate cut. This seems surprising given the current strength of the UK economy but can perhaps be attributed to the BoE being reluctant of acting at a time when a move would no doubt draw the ire of those who accuse the institution of not being politically neutral. Rather Governor Carney and the MPC will likely bide their time until the 7th November meeting which, by then far more will be known on the likely course of Brexit.