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Sterling drops after May’s Brexit comments this weekend

Sterling slid to a three-year low against the euro and a three-month low versus the dollar this morning, after a March deadline was set for the start of the formal process that will split Britain from the European Union.

Britain’s Prime Minister Theresa May told her Conservative party’s annual conference on Sunday that she was determined to move on with the process and win the “right deal”, in a move to ease fears inside her party that she may delay the divorce.

Triggering Article 50 of the EU’s Lisbon Treaty will give Britain a two-year period to clinch one of the most complex deals in Europe since World War Two, and will redefine the country’s ties with its biggest trading partner.

The fact that May has confirmed the timings for the triggering of Article 50 took away any lingering doubts and any lingering supportive elements for the currency, whereby…we could pretend nothing was going on.

Markets are fundamentally seeing Brexit as negative for the pound… and now we know it’s definitely going to happen, there’s more short-term or medium-term risk for the currency, but how it’s really going to play out remains to be seen.

Forecasts for the pound after the vote were almost universally bleak. A number of major banks predicted a fall to around $1.20, levels not seen since the Plaza Accord’s move to weaken the dollar in the mid-1980s, but it has so far held up better than that, bottoming out in early July at $1.2798.

From (May’s) comments it appears that next year it is going to be very volatile and the British currency may face a large move on any given day especially when it comes to conceptions and translations about Brexit.

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