On Friday, PM Theresa May delivered a speech in Italy. She laid out her plan regarding the exit of Britan from the European Union. But as the prime minister gave a closely watched speech, Sterling declined, and the main FTSE 100 stock index of Britain rose.
During the speech, the pound declined to as low as $1.3488, down from approximately $1.3550 before May stated speaking.
PM May announced that it would honour its budget commitments made during the period of its membership in the European Union. She also proposed a two-year transition period.
The prime minister also said that it could do better than a membership in the European Economic Area or a free trade agreement just like that of Canada’s.
“Smoke and mirrors from PM May isn’t fooling the FX market: PM May is trying to change the perspective…(but) negotiations are ongoing and constructive rhetoric is unlikely to be a catalyst for further strong gains in sterling,” stated Martin Arnold, an ETF Securities analyst.
On a report in the Telegraph newspaper that May would increase the possibility of Britain withdrawing from the European Union before March 2019, Sterling had dropped around 30 ticks. May said in answer to a question that Britain would leave at the end of March 2019.
On the other hand, the FTSE 100 of Britain surged 0.7% to the week’s high as the weaker pound raised its mainly foreign-earning constituents. Mid-caps have also gained 0.4%, and banks were up by 0.3%, hitting a session high.
British government bond futures temporarily rallied by approximately 15 ticks to a two-day high during the speech, before cutting gains to trade at around the level they were before she began.