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Pound Sterling Rises vs Dollar, Euro and G10 as Details of May's Florence Speech are Drip-Fed to Journalists

Pound rallies on signs of progress

News reports suggesting the UK Government is uniting around a fixed settlement fee to be paid to the EU and the need for a two year transitional deal appear to have aided Pound Sterling higher.

Strong gains were recorded across the Pound Sterling complex through late afternoon trade in London.

The Pound is up against all members of the G10 apart from the NOK, which has received a boost from its central bank.

Data cannot be behind Sterling's rally - instead it appears we are witnessing some positioning taking place ahead of Theresa May's speech due to be delivered in Florence, Italy on Friday.

The speech is expected to see May attempt to make concessions that will allow Brexit negotiations with the EU to proceed after months of apparent inertia.

The final composition of the speech was made following a cabinet meeting held in London on Thursday morning in which each member of cabinet had a say on the contents.

It is noted that at 2 hrs 30 minutes this was the longest cabinet meeting since the 2 hr 45 minute cabinet meeting held when the UK exited the European exchange rate mechanism in 1992.

 

 

Reports suggest the Government has settled on the idea that a two year transitional period will be required and a set sum of money will have to be guaranteed to Europe to progress with Brexit negotiations.

And from a currency perspective, progress on the pace of negotiations and a solid transitional arrangement is what the Pound needs in order to find upside traction.

A smooth and orderly Brexit eliminates the kind of uncertainty that has weighed Sterling down ever since the UK voted to leave the EU in June 2016 while a transitional deal frees up businesses to make much-needed investment decisions.

A show of unity amongst cabinet members - notably a picture of Hammond and Johnson leaving Number 10 Downing Street together - are also positive for the debate in that it suggests the UK can approach talks with a sense of purpose which will help pick up the pace of negotiations.

David Gauke, the Work and Pensions Secretary, said after the meeting that the Cabinet was "very united, all behind the speech".

"She has the backing of the Cabinet and all of us," he told Sky News.

Looking at the markets the Pound picked up pace towards the end of the day, when these developments were made available via various reporters.

GBP to USD conversion graph

At the time of writing, the Pound-to-Dollar exchange rate is quoted at 1.3578.

The Pound-to-Euro exchange rate is quoted at 1.1375.

The Pound-to-Australian Dollar exchange rate is quoted at 1.7108, it's highest level since July 7.

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