British pound sags ahead of May’s Brexit speech
After months of repeating the mantra that ‘Brexit means Brexit’, Prime Minister Theresa May is set to reveal details of the United Kingdom’s closely guarded plans for leaving the European Union, in a speech that has already increased pressure on the beleaguered pound.
The currency hit a three-month low Monday, a day before May’s address, over worries the PM will signal an economy-roiling clean break, known as ‘hard Brexit’. But May rejects that label and its opposite, a compromise ‘soft Brexit’.
"It is in the UK and EU's best interests to do the right deal, a deal that makes sense for us all," May spokeswoman Helen Bower said Monday.
Few advance details have been revealed about May's speech to be delivered Tuesday to an audience of British civil servants and international diplomats at London's Lancaster House, a Georgian mansion that has hosted international summits over the decades.
The prime minister's 10 Downing St office says May will call for a ‘global Britain’ that's open to the world "while also building a new and positive relationship with its European friends and neighbours."
That summary did little to reassure the pound, which plunged below US$1.20 in early trading Monday after newspapers suggested May would signal plans to take Britain out of the EU's single market and customs union.
Sterling has lost about a fifth of its value since Britain voted in June to leave the EU.
Some British media say May will advocate leaving the EU's single market in goods and services in order to gain control over immigration — a key issue for many voters who backed Brexit. EU leaders say Britain can't stay in the single market without allowing free movement of people from the bloc.
The prospect of losing single-market access alarms many in Britain's huge financial services sector, which relies on an ability to do business seamlessly across the 28-nation bloc.
It also worries the many foreign firms who use London not only as a financial hub but as an entry point into the EU.
"We now have to assume May will prioritise immigration controls and the price to pay will be to exit the single market," said Neil Wilson, senior market analyst at ETX Capital. "That could send the pound a lot lower still, perhaps towards US$1.10 in the coming weeks."
May's office declined to comment on currency fluctuations.
The pound recovered to above US$1.20 Monday after President-elect Donald Trump's comment in an interview with The Times of London that a US-UK trade deal could be done "very quickly" once he takes office this week.
Under EU rules, Britain is barred from striking bilateral trade deals while it remains a member of the bloc, though it can hold preliminary talks.