The following is based on research from DailyFX analyst Nick Cawley. DailyFX is a unit of IG Group Holdings plc (LON:IGG). For more of Nick’s research see DailyFX.com.
British Pound Falters on Concerns that UK Brexit Plans are Incomplete
During a speech to the Lord Mayor’s Banquet, UK Prime Minister Theresa May said that the country should grasp the opportunities ahead and set a template for other countries to follow. Her positive speech however was undermined later when a leaked memo prepared for the Cabinet Office – seen by the BBC and The Times – said that the country still had no common exit strategy. According to the BBC, the government said it didn’t recognize the claims made in the memo. According to the memo, preparations for Brexit will take another six months and may need an additional 30,000 extra staff to cope with the sheer volume of paperwork.
Prime Minister May hopes to trigger Article 50, starting the two-year process for leaving the European Union, by the end of March, a tight deadline if the memo is proved correct. The government is currently appealing a High Court ruling that Brexit needs to go through parliament before Article 50 can be triggered. The appeal is to be heard December 5 – 8 in the UK Supreme Court. Should the UK Supreme Court confirm the High Court ruling, it would further solidify the notion that a ‘soft Brexit’ is the most likely outcome.
May’s speech at Monday night’s Lord Mayor’s Banquet highlighted the UK PM’s drive for free markets and free trade, an important area of discussion ahead of Brexit talks. After pointing out that the UK would continue to lead the way in pressing for an ambitious EU trade agenda while the UK remained members of the EU, the PM highlighted her vision for the future.
“We will use the freedoms that come from negotiating with partners directly, to be flexible, to set our own rules and forge new and dynamic trading agreements that work for the whole UK,” adding that, “That is also why, in our negotiations on leaving the European Union, we are not trying to replicate the deal that any other country has with the EU. And we are not going for an off-the-shelf solution.”
Chart 1: EUR/GBP 4-hour Chart (September 28 to November 15)
The British Pound slipped lower against a firm US Dollar to $1.2455 and fell just over one cent against the Euro. The US Dollar Index (DXY) continued to trade a fraction below 100, after hitting a nine month high on Monday.