The pound has jumped sharply in reaction to Theresa May’s long-awaited speech on Brexit in which she confirmed the UK would leave the Single Market and MPs would get to vote on any final deal.
A day after the sterling-dollar rate reached its lowest since 1986, the PM’s declaration that she wanted to emerge from negotiations “more united” and “outward looking” appeared to reassure markets.
Against the euro the pound rose from 1.1366 to 1.1459, still well below a pre-referendum figure of 1.3072.
Craig Erlam, Senior Market Analyst at OANDA, said: “The one revelation that stood out though was the intention to put any deal before parliament, which in theory should tip the balance slightly further away from a hard Brexit even if May acknowledged that we will not be seeking access to the single market.
“This triggered a rally in the pound which in turn was the catalyst for the short squeeze that followed, sending it 2.5% higher against the dollar on the day.
”The market has been heavily short the pound as of late, with the pound being extremely sensitive to the prospect of hard Brexit. This left the market in such a position that any sterling positive revelations from May would trigger exactly the response we’ve now seen.
“The FTSE is now the worst performing major European index on the day, with the inverse correlation between the two that has been so strong since the Brexit vote back in June, driving it lower as the pound surged.”
Against the dollar the pound rose from 1.2127 to 1.2323.
May said that she wanted to remain part of a customs agreement with the remaining 27 EU states, but said she had an “open mind” over whether this would be through associate membership of the Customs Union or through some other arrangement.
She warned any EU member states seeking a punitive Brexit deal with the UK that that would be “an act of calamitous self-harm”, adding that “no deal for Britain is better than a bad deal for Britain”.