Sterling falls as May triggers Brexit
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Sterling falls as May triggers Brexit
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US Gross Domestic Product (GDP) later today
Current Market Overview
The Pound fell as markets reacted to news that the Article 50 letter had been signed and was on its way to European Council President Donald Tusk. Some analysts argued that Brexit had yet to be fully priced into the Pound, which was reflected when Sterling again dropped from its highs later in the day. Prime Minster Theresa May stated her intent in the letter to negotiate both divorce and trade terms together, over the next two years. Adding that under the current scenario, safety would be greatly diminished if there were no deal in place at the end of the two-year period. However, there was no mention in the letter of the repeated calls from EU officials for the UK to pay a Brexit bill of approximately £50 billion.
The outcome of Sterling depends on the deal the UK can seal with the EU over the next two years, but just as important are economic figures. David Kerns, commercial development lead for currency specialists, Halo Financial, comments, “Sterling did strengthen initially, until the size and scope of the negotiations started to sink in. It's important to keep a close eye on how the markets are moving while uncertainty continues."
German Chancellor Angela Merkel has already rejected these demands by insisting that negotiations on Britain’s exit from the European Union cannot run in parallel with talks on the future UK-EU relationship. The size of Britain’s exit bill and the rights of EU citizens in the UK must be agreed before talks can move forward. Perhaps it is now sinking in that these discussions will be protracted and supremely complex. Sterling is lower this morning and may struggle to rally in the current environment.
Looking ahead today, we have a busy day on the data front, with Eurozone consumer confidence, economic sentiment, industrial confidence and business climate all due out shortly. From midday, we have US Gross Domestic Product (GDP) and Core Personal Consumption expenditures to be released. Any unexpected political comments or data released may cause some volatility.
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