Met Traders

Brexit talk sends Sterling lower

Posted January 09, 2017 Ashley Chadwick

Prime Minister Theresa May has been downplaying talk that there will be a ‘Hard Brexit’, despite comments from the weekend indicating that the UK could well leave the single market.

These comments naturally weakened the Pound, sliding 130 pips against the dollar by the time Wall Street opened on Monday. Putting it just 60 pips away from recent lows, if you exclude the flash crash in October.

May’s comments on the weekend gave heart to those who want us to leave the single market. A leading leave campaigner has said ‘Whilst it's desirable to seek a zero-tariff deal or something close to that, we shouldn't wait more than two years to do that’. Adding that trading with Europe under the WTO rules is acceptable. If this was a view that the Government shared, then this would prevent EU countries using the two year time limit as a bargaining tool in negotiations, in the hope Britain makes compromises as time starts to run out. This is seemingly less likely now, with May’s comments suggesting border controls would be prioritised over free market access.

There are still two months until article 50 is expected to be triggered and before that there is a Supreme Court ruling to look out for. After an appeal by the Government who lost the last case, they will rule on whether MPs need to vote on triggering article 50.

Angela Merkel has come out and said that Britain cannot cherry pick the bloc’s four freedoms, which are freedom of movement of; people, goods, services and capital. It is the free movement of people that was a decisive factor for why leave won last year, as many who voted leave were in favour of reduced immigration. Merkel said, that if Britain does not accept those four freedoms, then access to the single market would be limited.

Picture by Number 10, via flickr