In a controversial speech yesterday, Bank of England (BoE) Governor Mark Carney stated that the British economy was not ready for a no-deal Brexit.
Furthermore, Dr Carney warned that the UK economy could shrink by 8 percent in the immediate fallout from Brexit if there is no trade deal in place and the country parts ways with the EU without a deal in place.
In addition, according to Dr Carney, house prices could fall by almost a third, unemployment would rise to 7.5 percent, and Sterling could drop by twenty-five per cent – meaning one pound would be worth less than one dollar.
It was not all bad news, however, with Mr Carney suggesting that growth in the UK economy would resume again by the end of 2023, although it would be at a lesser rate.
Back on the hard data front, UK mortgage approval figures released this morning showed a greater-than-expected jump from 65.726k to 67.086k, despite a forecast of 64.5k, although this failed to be reflected in the GBP/USD exchange rate.
US gross domestic product (GDP) figures for the third quarter were released yesterday, showing a decrease to 3.5 percent at an annualised rate, which was bang on the consensus expectation.
Despite this, the dollar dropped following a speech of US Chairman of the Federal Reserve, Jerome Powell, who appeared to signal that interest rate hikes may continue at a slower pace next year.
This change in tone for the Fed caused the pound to push back against the dollar, despite the fact that strong growth in the US economy in the last quarter means the Fed is likely to raise interest rates in December for the fourth time in the past year.
Looking ahead, any movement within the GBP/USD currency pairing is likely to be a result of Brexit related news, as Theresa May tries to rally support among MPs for her withdrawal agreement.
The US Federal Open Market Committee is set to release minutes from a meeting this afternoon, and if the Fed strikes a hawkish tone, the dollar is likely to push back further against the pound.
Furthermore, a slew of US data is due to be released this afternoon, and if it is largely positive, with the initial jobless and continuing jobless claims decreasing as expected, the pound is likely to continue falling against the dollar.