May Speaks Thus Afternoon About Brexit Plans
- Posted by Shyam Gokani in Uncategorised
- January 17, 2017
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The pound recovered from 3-month lows this morning, rising 0.7 percent against a broadly weaker dollar and 0.3 percent against the euro before a speech by Prime Minister Theresa May widely expected to lay out a “hard Brexit” scenario.
Options pricing suggested markets were still preparing for large swings in the pound over the next 24 hours:
Sterling skidded to its lowest levels – bar a “flash crash” in October – in 32 years on Monday, hit by signs that May will say clearly Britain is set for a “hard” Brexit out of the EU single market.
The pound fell as much as 1.5 percent against the dollar and 2.5 percent against the yen, falling to $1.1983 and 88.53 pence per euro before making a steady recovery.
RBC strategist Adam Cole pointed to policy comments from Bank of England Governor Mark Carney on Monday evening as another possible factor in sterling moves.
Carney said the Bank, which has cut interest rates and pumped more money into the economy to protect it from the uncertainty around the Brexit talks, could tolerate above-target inflation but there were limits.
Beyond politics, most other drivers are sterling-positive. Recent economic data has been strong for the pound.
May will say Britain will not seek a Brexit deal that leaves it “half in, half out” of the European Union, according to her office, in a speech setting out her 12 priorities for upcoming divorce talks with the bloc.
Those priorities will include leaving the EU’s single market and regaining full control of Britain’s borders.
It’s been reported that she is putting border control over the EU market, so that could lead to a hard Brexit.
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