20/11/2018 - Keynote Speech Well Received

GBP

Pound Sterling experienced another mixed day on Monday, as traders focused on Theresa May’s keynote speech at the CBI Conference. Her comments that an extension of the Brexit transition period would be unlikely caused initial weakness in the pound. The move came after May said she wanted any post-Brexit transition phase to have ended by the time the country is due to hold a national election in 2022. Theresa May also vowed to stick with her draft European Union divorce deal, warning that toppling her risks delaying Britain’s exit from the EU. Overall, her speech at the CBI was well received within the conference as she left to strong applause.

The DUP also signalled further weakness as they put out a statement on a no deal scenario. They stated that World Trade Organization rules are clear in stating that checks would be required EU-member Ireland and Northern Ireland if Britain was to leave the bloc with an exit deal. UK Northern Ireland minister Karen Bradley told reporters that they would do anything possible to avoid a hard border.

Late in the day, the pound managed to clawback some of the ground lost since the end of last week as fears somewhat eased on the notion of a no-confidence vote on Theresa May. It was being reported that only 8 more letters would be needed to signal a motion of no-confidence, but the momentum of such a motion slowed as the day went on, with more support forming around May. Markets are keen to see some level of certainty at this stage in the negotiations, and a removal of May would see the pound sink lower.

USD

The Dollar underwent a slight slump on Monday as cautious comments about the U.S economy from Federal Reserve officials weighed on the greenback. Such comments suggested that the central bank may be nearing the end its tightening cycle. This follows on from last week where prominent members Clarida and Kaplan raised concerns over a potential global slowdown.

Key Announcements

10.00 – GBP: Inflation Report Hearings
10.00 – GBP: BOE Governor Carney Speech