Analysts at Bank of Tokyo explained that the BoE warns of credit crunch risks.
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While these developments are good news and limits any near-term escalation of pound selling on increased ‘Brexit’ fears, the uncertainty is still likely to weigh on economic activity over the coming months.
After the failure of the general election opinion polls last year, companies, households and investors will remain cautious of reading too much into opinion polls in the run-up to 23rd June.
As the BOE’s Financial Policy Committee (FPC) stated this week, the EU referendum in June represents “the most significant near-term domestic risk to financial stability”. The BOE pointed to the UK’s large current account deficit that leaves the UK vulnerable to shocks that could result in a reduced willingness of foreign investors to finance that deficit resulting in “a further depreciation of sterling that may affect the cost & availability of financing.””
(Market News Provided by FXstreet)
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