The Therese May Hour and the Pound

It’s been almost 6-months in the making and the pound has been held hostage throughout, market sentiment towards how Britain will be departing from the EU being the key driver, offsetting any upside from the resilience in the UK economy, the markets hinged on whether it’s going to be a hard or soft exit.

Market sentiment towards the upcoming blue print for leaving was evident ahead of the speech through the Asian session and early part of the European session, gold rallying 1.24% to $1.2170.70, with Asian and European equities feeling the heat, while the pound recovered from Monday’s woes, gaining 1.15% to $1.21850 ahead of today’s main event, inflation figures providing support for the pound, following Carney’s Monday comments, with the markets prepped and ready for the British Prime Minister, though the extreme moves through the early part of the day were not just down to anxiety over today’s Brexit blue print, anxiety over Trump’s inauguration speech on Friday also weighing on market risk sentiment and the Dollar, the Dollar Spot Index falling 0.6% to sub-101 levels at the time of the report.

So, what is the government’s blue print to take Britain out of the EU, the markets expecting Therese may to lay out objectives with no intentions to accept a partial EU membership, once Article 50 is invoked at the end of the quarter?

• To provide certainty wherever possible, ensuring that businesses are not left in the dark wherever possible.
• To build a stronger Britain, taking control of affairs, bringing to an end the laws of the European Court of Justice, the government wanting to consider papers submitted by Scottish and Welsh governments as it plans Brexit, with parliament voting on leaving the EU.
• For Britain to remain the best friend to the EU.
• To create a fairer Britain, ensure that immigration is controlled with openness to international talent, while also guaranteeing the rights of EU citizens already living in Britain and for the rights of Britains living in the EU.
• Will look for a bold and ambitious free trade agreement with the EU, Britain not seeking membership of the single market, but access to it under a new model, with the days of Britain making vast contributions to the EU coming to an end, with only smaller contributions to be made.
• Rebuild the existing customs union membership that prevents Britain from striking comprehensive trade agreements with countries beyond the borders of the EU, while some form of a customs union agreement would be desired to enable trade with the EU.
• Continue to work with allies on crime, terrorism and foreign affairs.
• Seek to avoid a disruptive cliff edge and ensure a smooth transition once Article 50 is invoked, Therese May against an indefinite transition, supporting a phased transitional deal allowing for implementation of different aspects of Brexit.
• Britain will look to maintain open travel with Ireland.
• Take a leading role in science and innovation.

Therese May’s speech led to the pound surging to $1.232 against the Dollar, making it a 2.27% gain at the time of the report, Therese May stating that a parliamentary vote will be forthcoming, driving cable through the speech with gold easing to $1,212.70, a gain of 0.83% on the day, the FTSE100 easing further off the strength of the pound, down 0.53% at the time of the report.

If there were any hopes of a soft-Brexit, Therese May’s speech should be clear on the fact that there is one way out and that is a full exit, as the markets refer to as a Hard-Brexit.

The speech was certainly supportive of the pound, the combination of rising inflation and Trump’s inauguration speech on Friday now likely to see further upside for the pound through the remainder of the day.