The British Pound had a good day on Monday, as an apparent truce between the warring factions of the Conservative party and some decent economic data brought a recently-rare combination of good news. As recently as last Thursday, GBP/USD hit a low point 1.3720; the lowest since January 12th (the day after the ECB first spoke about changing forward guidance). The pair rallied on Friday as the USD came under pressure and the GBP extended its gains on Monday to a five-day high around 1.3870. By close of business in New York, the GBP was at the top of our one-day performance table with gains of around three-tenths of a percent against most major currencies and more than one per cent against the CAD. This morning in Europe, GBP/USD has reached a high of 1.3890.
On Theresa May’s speech, we said yesterday that, “the reaction of the EU will be more important than the routine criticisms from Opposition parties in Westminster.” The Guardian newspaper leads today with the story that Stefaan de Rynck, the main adviser to the EU’s chief Brexit negotiator, Michel Barnier, stressed that the rules of the single market required far more than her chief proposal – a mutual recognition of standards. In his speech, at a special LSE lecture in London last night, de Rynck said, “The EU has moved away in the wake of the financial crisis from mutual recognition of national standards to a centralised approach with a single EU rule book and common enforcement structures and single supervisory structures.” He also claimed EU businesses, faced by a choice, “are more concerned with maintaining the integrity of the EU single market than any loss of access to British markets.”
It had been expected that the EU’s guidelines for the EU-UK post-Brexit trade talks would be released today but publication of that document, which will constitute the EU’s fullest response yet to Theresa May’s Lancaster House speech on Friday, has been postponed. This might remove one of the near-term negatives for the GBP, though Arlene Foster (the head of the DUP Coalition partner) has tweeted, “Just concluded a constructive meeting with Michel Barnier. There are sensible solutions to the border question. Greater flexibility needs to be shown by Brussels. Unacceptable for Northern Ireland to be treated separately from rest of UK as set out in the draft EU legal text.” The British Pound opens in North America at USD1.3890, GBP/EUR1.1210 and GBP/CAD1.7980.