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All eyes on May’s speech

Sterling steadied close to a seven-week low against the dollar today, all eyes are on a speech from Prime Minister Theresa May on her plans for a trade deal with the European Union.

May will in the early afternoon set out her vision for a Brexit deal. The prime minister, weak after losing her parliamentary majority last year, will struggle to satisfy the demands of EU officials.

Based on media reports on the cabinet deal reached last week, the speech may well contain lots of unrealistic scenarios that (European Council President) Donald Tusk has stated recently were based on pure illusion.

If that’s the case today, we may well see further pound weakness.

Worries that Britain might not secure the post-Brexit transition period that it wants by the end of March have knocked sterling this week, with the EU’s chief negotiator Michel Barnier saying a deal on that was not guaranteed.

The pound has struggled to build on a rally earlier this year amid a resurgence in political risk centered on Brexit and a broad rebound in the dollar. It suffered its worst month since October 2016 in February, as the greenback strengthened across the board.

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