22 February 2019
Theresa May is reportedly planning a hard Bexit to regain control of Britain's borders and laws. Photo: Reuters
Theresa May is reportedly planning a hard Bexit to regain control of Britain's borders and laws. Photo: Reuters

Pound drops below US$1.20 as May reported to seek hard Brexit

The pound fell against the dollar, dropping below US$1.20 for the first time since October’s flash crash, after reports said British Prime Minister Theresa May will signal plans to quit the European Union’s single market to regain control of Britain’s borders and laws.

Sterling declined against all of its major peers after the Sunday Times said that May will prepare to withdraw from tariff-free trade with the region in return for the ability to curb immigration and strike commercial deals with other countries, Bloomberg reports.

The currency has fallen 19 percent against the dollar since the nation opted to leave the EU in June’s referendum, with declines since the initial aftermath of the vote mainly sparked by concern May would pursue a so-called hard Brexit.

The report didn’t say how the information was obtained, and the prime minister’s office declined to comment on the report when contacted by Bloomberg News.

Government officials told the Sunday Times they expect her speech on Tuesday to cause a further “market correction”.

A measure of anticipated price swings for the pound jumped when the speech was announced last week as currency traders sought protection against more turmoil.

With details of the UK’s exit strategy remaining scant less than three months before May’s own deadline to trigger formal talks with the EU, traders have previously seen May’s pronouncements on Brexit as a signal to sell the pound, even if she has mainly reiterated existing views.

Sterling fell after her speech at the Conservative Party conference in October, which fanned speculation she was eyeing a clean break with the EU, and dropped to the lowest level since October last week following her first television interview of 2017, according to Bloomberg.

“The prospect of another speech from PM May is likely to see sterling yet again on a something of a roller-coaster,” Jeremy Stretch, head of Group-of-10 foreign-exchange strategy at Canadian Imperial Bank of Commerce, wrote in an e-mailed note before markets opened. “Fresh sterling lows versus the dollar seem almost inevitable.”

The pound fell as much as 1.6 percent to US$1.1986 in Auckland on Monday, the lowest level since Oct. 7. It fell to as low as US$1.1841 on that day, the lowest level since 1985.
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