The Pound sinks and Downing Street backtracks on hard Brexit

Theresa May’s interview suggests hard Brexit. Pound crashes. Downing Street backtracks to say nothing ruled in or out. And we are all still none the wiser.

Today has seen the pound sink to a two-month low. Perhaps, not surprising considering that Theresa May gave her first TV interview of the year yesterday. Many have taken the interview as further evidence that the UK is moving towards a hard Brexit with the prime minister prioritising immigration control over access to the single market.

We will, outside the European Union, be able to have control of immigration and be able to set our rules for people coming to the UK from member states of the European Union”

Theresa May

As we all know, the EU has maintained that access to the single market was only possible with acceptance of the EU’s four freedoms including free movement of people. The EU has also been consistent with its assertion that there could be “no cherry-picking.” If the government can’t accept free movement and given the EU’s position on it, it seems inevitable that Britain will be out of the single market.

Sky News quotes financial analyst Connor Campbell as saying that her comments signal that “control of borders” was more likely to be prioritised over single market access.

The Prime Minister’s comments were read as falling decidedly on the ‘hard’ end of the Brexit spectrum, with ‘control of borders’ likely to be prioritised over continued access to the single market.”

Connor Campbell, financial analyst at Spreadex

Downing Street responds to the Pound’s response

What’s interesting about today’s slide is Downing Street’s response. Reuters reports that a Downing Street spokesperson has said that Theresa May “is ruling nothing in or out”.

She hasn’t ruled anything in or out – she’s said she wants the best possible deal for trading with and operating within the single market.”

Downing Street spokesperson

“Weak pound = weak Britain”

In the Guardian’s live reporting of today’s financial news, it features another financial expert saying that Downing Street may be worried that voters will start associating a “weak pound” with a “weak Britain”. Let’s face it, it would. We’ve already seen businesses fail because of the weakened pound. And what we’ve seen since the referendum is that any hints at a hard Brexit leads to a weaker pound.

Downing Street may be concerned about what a collapse in the pound means psychologically for voters. For many it can be summed up simple as ‘weak pound = weak Britain.”

Neil Wilson, ETX Capital

Speaking after her speech on mental health today, the prime minister said that people were “getting it wrong” if they thought she was talking about a hard Brexit in her interview.

In her interviews, she had also said that the government’s thinking on Brexit was not “muddled”. We’re not so sure! If the government are concerned about its impact on the Pound, it should probably say nothing until it has something to actually say.

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