The pound has tumbled ahead of Theresa May’s big Brexit speech – as strong data pushes up the euro (GBPEUR)
The pound tumbled against both the euro and the dollar this morning as traders awaited a landmark speech on Brexit by Theresa May.
Meanwhile, the euro was pushed higher by surprisingly strong manufacturing data from the Eurozone.
After a week of post-Brexit vote highs, the pound fell 0.1 per cent against the dollar, to $1.3567.
Meanwhile, the euro climbed 0.5 per cent against the pound, to 88.33p, after Markit’s purchasing managers’ index (PMI) for the Eurozone’s manfuacturing sector showed a reading of 58.2, smashing expectations of 57.1, while the services sector rose to 55.6, against expectations of 54.7. Any figure above 50 in the index denotes growth in the industry.
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However, all eyes will be on May’s big speech this afternoon, in which she is expected to set out her “vision for a bold new economic partnership” with the EU, proposing a formal period of transition.
“How sterling – and, in turn, the FTSE – performs across the rest of the day is going to be dependent on the state of Theresa May’s Brexit speech,” said Connor Campbell, financial analyst at Spreadex.
“Not only what she proposes, but how the EU reacts to the comments – the fact she is going to ask Michel Barnier and co. to be ‘imaginative and creative’ suggests they may not go down well.”
But Neil Wilson, senior market analyst at ETX Capital, suggested markets’ reaction to the speech may not be straightforward.
“Theresa May isn’t particularly loved or feared at the moment; but by the end of today she hopes to instil a little of both in the right camps: fear in the EU that she is not afraid of the cliff edge and a little more love among the party faithful ahead of the Tory conference next week,” he said.
“The PM is likely to make certain overtures in an attempt to kick-start the next round of talks on September 25th, and this ought to give some direction to the pound. If the market decides this speech means the next round of talks have a chance then the pound could rise. If not, recent rate-hike speculation based gains could erode.
“But while there’s a lot of chatter around the Florence speech, it may not be that decisive. These things have a tendency to over-promise and under-deliver and details will be thin on the ground. It is questionable that she can ‘break the deadlock’ as some suggest, given the meat of any negotiations take place behind closed doors.”
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