Concern as Time of May’s Brexit Speech not Yet Disclosed

Foreign exchange traders and commentators have reacted with frustration at a refusal by Prime Minister May’s office to release the time of Tuesday’s much-anticipated Brexit speech at Lancaster House.

The speech is the most anticipated event on this week’s foreign exchange calendar as it should give markets some guidance as to whether or not they were right in punishing the Pound so severely at the start of the new week.

Markets will be desperate for a steer on whether the UK is heading out of the single market, but the inability to provide a time for the event has left some commentators scratching their heads.

“As if we needed any further uncertainty in the currency markets, we still don’t know when Theresa May’s speech will take place tomorrow. Infuriatingly for market watchers, the PM’s office has declined to say when she will give her most important speech yet on the topic,” says Neil Wilson at ETX Capital.

Wilson reflects that the failure to provide a time seems a trifle odd given the market sensitivity to what the prime minister is going to say and particularly since the gist of it has already been advertised in the weekend press.

Expect More Volatility

One-week volatility is at its highest since June, reflecting just how important this speech is to the market’s expectations for Brexit.

Traders need to be mindful that these types of speeches can lead to significant price swings that don’t always reflect the longer-term trends.

“We can expect some wild gyrations in the run-up to the event – the fact we don’t know when it is will only make this worse. There is plenty for markets to be nervous about. We don’t really know what’s coming and talk of a correction in the markets following the speech could be taken two ways, depending on the content,” says Wilson.

The ETX Capital analyst says we could see either a further slide in the pound as markets price in hard Brexit.

“If the UK is heading straight out of the single market, a clean break with no transition deal, the Pound could drop a lot more. Sterling’s fall, though around 20% since June, has not gone far enough to really reflect the UK leaving the single market,” says Wilson.

Indeed, we have heard analysts throwing about forecasts for parity in both GBP/USD and EUR/GBP in the event of a hard-Brexit.

But, what if a positive surprise is sprung by May?

“We might witness a significant reversal in recent Pound falls if there is something positive to shout about,” says Wilson.

What might that pound-positive news be?

It could be details on a transition deal that eases the pain of divorce says Wilson:

“There are a lot of factors to consider, but if May signals a much slower break-up then there could be some upside for the pound.

“Details on a transition deal might just be enough to keep the pound afloat for the time being, although longer term it’s hard to see the bears being shaken off.”