Brexit: Pound sterling falls after Bank of England boss Mark Carney warns no deal likely

Governor said leaving the EU with no agreement in place would be 'highly undesirable'

Sterling dropped against the dollar in early Friday trading after Bank of England boss Mark Carney said he believes the chances of a no deal Brexit are “uncomfortably high” and warned the government needs to do all it can to avoid leaving the EU with no agreement in place.

Sterling fell against the dollar following the Bank chief's comments, dropping below the $1.30 mark to $1.2991.

Mr Carney said that while the UK’s financial system would be ready to withstand such a shock, a no deal scenario would be “highly undesirable”.

He told the BBC: “I think the possibility of a no deal is uncomfortably high at this moment. Our responsibility in the other half of the bank - our job is to look at what could go wrong and what we could do to make sure that the Bank is in a robust position so it lessens the impact of a no deal Brexit.

"We have made sure that banks have the capital, the liquidity that they need and we have the contingency plans in place... if there were to be a no deal Brexit..

"A no deal Brexit is highly undesirable."

His remarks came after the Bank’s monetary policy committee voted unanimously to raise interest rates above 0.5 per cent for the first time since the financial crisis. Mr Carney said on Thursday that Threadneedle Street would continue to follow a strategy of “ongoing, limited and gradual tightening of monetary policy”, which could lead to three further rate rises over the next three years.

On Friday, the central bank leader said the base rate could be raised to 1.5 per cent within that period, well below the average of 5 per cent interest since the formation of the BoE in 1694.

"We dont see it getting anywhere near back to that level for a long time... not for the foreseeable future,” he said.

"That's because there's some big structural changes in the UK and global economy."