Sterling had little to react to as Theresa May’s speech in Florence this afternoon offered little in the way of fresh details on Britain’s position on Brexit.
Leading up to the speech, the markets were slightly nervous, and as Theresa May started speaking, Sterling reacted positively, however it soon became apparent that Theresa May was doing her best to avoid the main questions that still loom over Britain’s positioning with regards to Brexit. That is, the movement of EU nationals, which if we enter a two year transitional period with the EU after March 2019 (which was confirmed yet provided no further support for Sterling) will be subject to a registration process which is still unclear.
The main anticipation for the event was around the divorce bill from the EU and its amount. Unfortunately, Theresa May failed to mention this and as a result the backlash from EU ministers is likely to put Theresa May under pressure. I feel that Sterling’s consolidation level is 1.13 at present against the Euro and after the speech sits just below this for the pair. I feel as though this could be a sign that for now the Pound is being buoyed by future hopes of an interest rate decision, which is expected to take place in November.
The fact that the Pound came out unscathed from this event highlights just how uneventful Theresa May’s speech was. Although no damage was done by Theresa May, I feel as though investors were looking for something a bit more, a bit more clarity, before investing in Sterling and helping it break into the 1.14’s again.
For now, I feel as though Pound will remain under pressure with regards to Brexit negotiations. A divorce amount is the key ingredient in order for the fourth round of crucial Brexit negotiations to progress, which are due to take place on the 25th September. Until then, the Pound will remain under pressure in my opinion.