Prime Minister Theresa May’s speech in Davos gave sterling another boost in morning trading, two days after her Brexit negotiation details pushed the pound to its biggest one-day gain since 1993.
May told an audience of global business leaders and bankers post-Brexit Britain will aim to boost industry, which brings the benefits of globalisation to ordinary people.
The pound rose to highs of $1.2336 against the US dollar following the Prime Minister's speech, however later dipped back below £1.23.
The FTSE 100 has fallen over 0.6 per cent in response, briefly dropping below the 7,200 points level before bouncing slightly. London’s blue chip index had closed above 7,300 points at the end of last week.
Read more: Sterling retreats from massive May-day gain
The FTSE tends to move inversely to the pound owing to the large proportion of profits (around 70 per cent) earned in other currencies, which are less valuable as the pound rises.
After two weeks of continual sterling weakness as markets priced in hints the UK will abandon plans to try to stay in the Single Market, traders welcomed a marked increase in certainty around the government’s plans, including an announcement both houses in Parliament will get a vote on triggering Article 50.
Investors welcomed the news, with sterling jumping three per cent following the speech, despite the confirmation Single Market membership was definitely off the table. The customs union was also under serious threat unless the UK can carve out an unlikely (and unprecedented) exemption.
Read more: Sterling rockets on Theresa May speech
Chris Beauchamp, chief market analyst at IG, said: “Rising home currencies continue to hit the FTSE and eurozone markets, despite Janet Yellen’s best efforts last night to talk up the dollar and the chances of rate hikes aplenty. Her efforts seem to have lasted only a few hours, with the greenback in retreat and lifting the pound and the euro.
“We are seeing stock markets in retreat across the board this morning, with the FTSE 100 hitting its lowest level since 9 January,” he added.
“This doesn’t sound like much, but there are clear signs of investor fatigue and nervousness, especially with Trump’s ascension to power just hours away.”