GBP Declines on Theresa May Brexit comments


Markets have thought Brexit would not bring drastic changes to the relationships between the UK and the European Union. However, with Theresa May Brexit comments they started to revise their expectations.

10 January, AtoZForex – UK Prime Minister Theresa May have reminded markets that Brexit could have side-effects on the country and it is in the interest of Europe to assure it. Lee Ferridge Head of Macro Strategy at State Street Global Markets commented that there were many hopes in regards to Brexit. But markets are now realizing that it might not be a ‘soft’ Brexit.

British voted to leave the EU in June which surprised markets and caused uncertainty. Following the referendum, the British pound hit more than 30-year low level. But then the focus shifted to the US elections. With some starting to think that Brexit may involve fewer changes in the relations between the union and Britain than initially anticipated.

Theresa May Brexit comments

Yet, on Monday concerns over the Brexit emerged again. As Theresa May mentioned that Brexit could result in Britain losing the access to the single European market. British pound declined by more than 1 percent to $1.2125. This is the lowest level since the 28th of October.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman, stated that the crucial thing for the country now is the Supreme Court decision. It will be out in the next two to three weeks. According to Nicholas Colas, Chief Market Strategist at Convergex,

“In some ways Brexit is a case study for what the effects of the dissolution of the euro might be. It was the first domino to fall back last year, even before Trump won the election. It was the first vote that showed populism had really” gained ground.”

Triggering Brexit

Britain still needs to officially launch the two-year negotiations process of exiting the union by invoking Article 50 of the Treaty of Lisbon. The agreement establishes requirements for how the country would exit the union. Theresa May stated she would trigger the talks until the end of March. UK Prime Minister has recently repeated her intentions, saying that:

“We will, outside the European Union, be able to have control of immigration and be able to set our rules for people coming to the U.K. from member states of the European Union.”

In case the country is willing to pursue hard Brexit, other European countries might take the same position.

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