Here we go again: Sterling falls as markets show their nerves ahead of Carney meeting
It seems markets' nerves have become too much to bear ahead of an appearance by Mark Carney before a committee in the House of Lords later today – while the chancellor didn't give them much cause for confidence.
The pound fell 1.1 per cent against the dollar, to $1.2009, in mid-afternoon trading – its lowest since the so-called flash crash earlier this month. Meanwhile, it fell 0.9 per cent against the euro, to €1.1148.
Analysts suggested markets' sudden loss of confidence had been caused by anticipation over the Bank of England governor's appearance before the Lords' economics affairs committee, and questioning of chancellor Philip Hammond, who admitted the EU may give Britain a bad deal over Brexit.
“There's a political debate going on here in Europe where European politicians are very conscious of the impact of Britain's departure on their political project. I don't think we can be certain economics alone will dictate the course of this negotiation.”
Carney is expected to face tough questions on the implications of the vote on the EU referendum. Although that is now fairly run-of-the-mill stuff, markets will be scrutinising his comments for any hint of what could take place at the Bank's next monetary policy meeting, due to take place next week.
"[The] appearance stands out… for a couple of reasons," said Craig Erlam, senior market economist at Oanda.
"The first is that he is due to comment on the economic consequences of the Brexit which given his warnings prior to the vote, the relative stability in the economy so far and the pressure he has come under to resign because of his apparently politicised views, should make for interesting hearing.
"Further warnings that the economy is heading down a bumpy road or that signs are already appearing that the economy is coming under strain may hit the pound during Carney’s testimony, while any concessions, however improbably, that the BoEs assessment was inaccurate may offer some support to an already heavily depreciated currency," he said.
Now read: Flash crash – why did it happen?