Brexit Briefing: More Signs of UK Discord Fail to Dent the Pound

2017-09-18 15:49:00

Talking Points

- The top official at the UK’s Brexit ministry has moved to become Prime Minister Theresa May’s EU adviser.

- UK Foreign Secretary Boris Johnson has been accused of ‘backseat driving’ and has been criticized by the UK’s statistics regulator.

- However, the Pound has shrugged off all signs of discord ahead of a keynote speech by May in Florence on Friday.

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More signs of discord in the UK government over Brexit ahead of a keynote speech by Prime Minister Theresa May in Florence on Friday have failed to dent the Pound, which remains close to its highest levels against the US Dollar since June 24 last year, the day after the British people voted to leave the EU.

Over the weekend and on Monday, a series of developments have led critics to continue their accusations of chaos in the UK over Brexit. First, Foreign Secretary Boris Johnson set out his own vision for the UK outside the EU in a 4,300-word article in The Daily Telegraph newspaper on Saturday. Home Secretary Amber Rudd said it was “absolutely fine” for him to intervene publicly but then agreed with an interviewer that “yes, you could call it backseat driving, absolutely”.

The article inevitably led to suggestions that Johnson is planning to challenge May for leadership of the ruling Conservative Party and he was also challenged over repeating a claim in the EU referendum campaign that the UK would be £350 million a week better off outside the EU. David Norgrove, who chairs the UK Statistics Authority, said he was surprised and disappointed that Johnson was still quoting a figure that confused gross and net contributions, and called it “a clear misuse of official statistics”.

Then, on Monday, the London Evening Standard newspaper, edited by former UK Chancellor of the Exchequer George Osborne, broke the news that Oliver Robbins, the top official at the UK’s Brexit ministry, had quit to take up a new coordinating role in May’s Downing Street office after disagreements with Brexit Secretary David Davis.

The move was later confirmed by a government spokesman, although it was described as a change to strengthen cross-government coordination, with Robbins becoming May’s EU Adviser in the Cabinet Office.

This has all muddied the waters ahead of a high-profile Brexit speech by May on Friday in the Italian city of Florence, described as an attempt to break the deadlock in the withdrawal negotiations, which were due to resume this week but have now been postponed.

Moreover, May was reported to have “slapped down” Johnson for his unauthorized intervention amid accusations that he was undermining her approach to Brexit as well as planning a leadership challenge. Yet the only major movement in GBP/USD Monday was a fall after Bank of England Governor Mark Carney gave a speech in Washington DC in which he went no further than previous comments that the majority view on the bank’s rate-setting monetary policy committee is that some withdrawal of monetary stimulus will likely be needed in coming months.

Chart: GBP/USD Daily Timeframe (June 20, 2016 – September 18, 2017)

Chart by IG

The key takeaway therefore remains that for traders in the British Pound it’s UK monetary policy that needs to be watched closely while, for now at least, Brexit remains rather less important as a market-mover.

Markets