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British Pound Rallies as UK PM May Confirms Hard Brexit

British Pound Rallies as UK PM May Confirms Hard Brexit

Nick Cawley, Strategist

Talking Points

- The UK is leaving the Single Market but hopes for amicable divorce.

- PM May says that final Brexit deal will be put to both Houses of Parliament

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

The British Pound pushed higher Tuesday as UK Prime Minister Theresa May said that the UK will leave the Single Market, leaving no doubts about a ‘hard’ Brexit ahead. In a prepared speech that had been seen before May spoke, the UK PM laid out her plans for Britain’s future post-Brexit, including new trade agreements, control over migration and the repatriation of powers back from Brussels. The PM also made it clear to the audience that 'no deal' would be better than a 'bad deal' for the UK and would also be against the European Union's self-interests. The final Brexit deal will also be put in front of both Houses of Parliament to vote on.

The government’s 12-point plan also included a promise of clarity on Brexit dealings wherever possible, although not a running update, while the UK “will pursue a bold and ambitious Free Trade Agreement with the European Union.” PM May also said that she wants to guarantee rights of EU citizens living in Britain and the rights of British Nationals in other member states “as early as we can.”

The speech was widely seen as a plan for a ‘hard’ Brexit and, counter to recent moves, drove GBPUSD higher and EURGBP lower as the markets now have a clear framework of the UK government’s plans. GBPUSD gained nearly two cents, rallying up to 1.2347 from a pre-speech level of 1.2160, while the EUR weakened against GBP, falling to 0.86680 from 0.87900.

Chart: GBPUSD 5-Minute Timeframe (January 6-17, 2017)

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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