Lee Hardman, Currency Analyst at MUFG, notes that the pound has remained at stronger levels in the Asian trading session after strengthening sharply yesterday following UK Prime Minister May’s speech at the Confederation of British Industry’s annual conference.
Key Quotes
“Prime Minister May acknowledged calls from business leaders to avoid a “cliff edge” when the UK leaves the EU. She stated that “I understand that people don’t want a cliff edge, they want to know with some certainty how things are going to go forward. That will be part of the work that we do in terms of the negotiation that we are undertaking”. The comments have prompted speculation that the UK government will seek a transitional arrangement to preserve single market access for businesses until a free trade agreement has been finalised with the EU, which is likely to take longer than the two year withdrawal period permitted once Article 50 has been invoked.”
“A spokesperson for Prime Minister May has since declined to say whether the government will be seeking a transitional arrangement saying only that there’s a wide range of issues” that would need to be worked through during Brexit negotiations. However, the spokesperson did make it clear that the UK government will not be seeking to extend the Article 50 process beyond the two year period and reiterating that Prime Minister May wants the UK to leave the EU by the end of March 2019 as the latest point.”
“A transitional arrangement seems like a reasonable scenario to us as it would allow the UK and EU more time to reach an agreement on a comprehensive free trade agreement which would eventually replace a temporary transitional arrangement. It would help to reduce economic disruption and provide greater clarity for businesses easing the Brexit transition. However, a transition arrangement may prove unpopular with the UK public who voted to leave the EU. Some compromises such as continuing to pay into the EU budget to preserve single market access would likely be required during the transition period. More importantly, it is not known whether the EU would accept a transition arrangement.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.