Prime Minister Theresa May having previously been cynical of Carney has given her support to him to lead the Bank of England for an extended term. Governor Mark Carney whose current contract ends in 2018 has been under pressure after the Bank gave a very negative outlook for Brexit, however it hasn’t really come to fruition as expected.
Furthermore, Carney has faced criticism for cutting the interest rate when the currency had already dropped in value. Inflation is expected to increase over the next few months after the currency crash which over time could help bring an interest rate hike. The Bank of England Monetary Policy Committee will meet this Thursday for their latest meeting and its expected there will be no further movements. Previously there had been threats of further cuts, however in the short term it appears that is unlikely.
Italian Prime Minister Matteo Renzi tells his party and supporters to step up the Referendum campaign. The Italian people will vote on constitutional reforms in the first week of December and there could be major volatility. Renzi has said if he does not win the vote for reforms then he will resign as PM. The problem with that is one of Italy’s most popular parties is a far-right wing group called the 5-star movement and could well cause an election upset.
Italy has a strong anti EU sentiment that’s continuously growing as banks look to reclaim the previous bailout funds. The Italian system appears to be flawed in the sense that they can’t actually pay funds back and merely have to restructure existing debt. The 5-star movement’s main policy would be an EU Referendum and this could pull Italy out of the EU, arguably making it even more of a challenge to claim the debts back.
Italy has been one of the main concerns for Euro investors over the last year and if this problem was to once more flair up I have no doubt the GBP/EUR could move in Sterling’s favour. A crisis in the EU could be the Pounds best chance of recovery.