‘Brexit-hit pound looks like an EM currency’

Pound volatility is at emergingmarket levels and UK assets are set for a substantial repricing once the Brexit outcome becomes known, according to Bank of England Governor Mark Carney. “Sterling volatility, as you would know, is at emerging market levels and has decoupled from other advanced economy pairs for obvious reasons,” Carney said. “A variety of other indicators show financial markets are going to move substantially in one way or another depending on the outcome of ” Brexit.

The UK currency has seen some extreme highs and lows over the past few months as the endgame approaches, rallying to $1.32 in May before plunging below $1.20 earlier this month. The turmoil even raised sterling volatility above that of the Turkish lira earlier this year.

The currency has fallen close to 20% since the 2016 referendum and its fate is dependent on the outcome of Britain’s exit from the EU. Sterling would rally to $1.33 on a Brexit deal and plunge to $1.10 on a no-deal exit, according to a Bloomberg survey.


Still, Carney’s comments come as implied volatility on the pound-dollar pair has actually taken a leg lower with the confirmation that UK lawmakers are on an enforced holiday until mid-October. A one-month gauge of price swings fell to the lowest in over a month with a similar move seen in the three-month as lawmakers voted to force PM Boris Johnson to seek a Brexit delay if he can’t secure a deal next month.