Pound jumps after Theresa May Brexit speech

The pound shot up after Theresa May delivered a less hawkish Brexit speech than feared, but UK stocks tumbled.

British Prime Minister Theresa May delivers a speech on her government's plans for Brexit. Pic: AFP

The British pound shot to nearly $US1.24 after Prime Minister Theresa May declared that any Brexit deal would be put to a parliamentary vote, in a speech seen as less hawkish than feared.

But the London stock market tumbled 1.5 per cent as the stronger pound weighed on share prices of multinational firms.

“The Prime Minister has adopted a more pragmatic approach to Brexit than expected, providing some much needed relief for the pound,” NFS Macro analyst Nick Stamenkovic said.

“Indeed, the surprise decision to allow parliament to decide on the final Brexit deal signals a more flexible approach.”

Britain’s parliament will be able to vote on any final Brexit agreement, Theresa May said following pressure from MPs to have more say over leaving the European Union.

“I can confirm today that the government will put the final deal to a vote in both houses of parliament before it comes into force,” she said in a hotly-anticipated speech.

The news sent the pound rallying to $US1.2397 — its highest level for ten days. That compared with $US1.21 just before the speech and $US1.2055 late in New York on Monday.

“The pound took off like a rocket today on what amounts to a far less hawkish Brexit speech from Theresa May than many had feared,” said ETX Capital analyst Neil Wilson.

Sterling had slumped on Monday on reports that Ms May was ready to take the country out of the EU in a so-called “hard” Brexit.

Ms May said overnight (AEDT) that Britain will leave the EU’s single market to restrict immigration in a clean break from the bloc.

“The bulk of what May said today had already been leaked ... The one point of interest was the revelation that parliament will vote on the deal which sent the pound higher,” noted Oanda analyst Craig Erlam.

The pound had collapsed on Monday to $US1.1986, its lowest level since October’s “flash crash” that had sent it to a 31-year low of $US1.1841.

A hard Brexit would see Britain’s departure from the single market or tariff-free zone, while also ending the free movement of people.

Ms May insisted on Tuesday that Britain would seek a trade deal giving “the greatest possible access” to the market on its departure.

Britain has two years to negotiate a breakup deal once May triggers Article 50 of the Lisbon Treaty, officially declaring the country’s intention to quit, or face leaving with no agreement.

Article 50 will be triggered by late March at the latest.

Asian investors meanwhile moved warily yesterday before Ms May’s speech and ahead of Donald Trump’s inauguration on Friday.

Coming back from a three-day weekend, US stocks retreated as ” ... uncertainty surrounding the new President elect’s domestic policy continued to weigh on risk appetite”, said Michael Hewson, chief market analyst at CMC Markets.

Meanwhile the dollar slumped after comments from Trump that the currency was too strong.

AFP