Wednesday, 18 January 2017

The pound holds its ground after Theresa May's speech

Good afternoon,

After the volatility we witnessed yesterday, today has been much more subdued for the GBP/EUR cross, with the currency pair spending the majority of the day bouncing between €1.15 and €1.1550.

GBP/EUR graph




The pound seems to have stabilised following Prime Minister Theresa Mays speech yesterday afternoon, as her comments have provided some much need clarity over how the government plan to tackle the UK's exit from the European Union.

Despite stating in her speech on Tuesday that Britain will give up access to the single market, May's twelve point plan seems to have gone down well with investors, and for the time being at least, has removed some of the uncertainty from within the FX markets.

Does this mean the pound will continue to rise?

Although the move we witnessed yesterday has given the pound some much needed breathing space, I still think it is too early to say that this is the start of a full blown recovery. We are still waiting to hear the Supreme Court ruling and the government still need to trigger Article 50 before official negotiations can begin.

The negotiations to leave the European Union could rumble on for years and although markets responded well to Theresa May yesterday, her European counterparts might not be as easy to convince.

We already know we will not get a running commentary about how the negotiations are going, and until a deal is struck and we know exactly where we stand, I believe the pound will struggle to make any major advances against the euro for the foreseeable future.

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