The British pound remains under further pressure today on the back of comments by the UK prime minister over the weekend which analysts and investors interpreted as a “hard Brexit”.
At 10.16am (GMT) the British currency was trading at $1.2107 against its US counterpart down from $1.2124 in yesterday’s trading.
Prime minister Theresa may said in her first interview this year that she was not interested in keeping “bits of membership of the EU” while mentioning that keeping control over immigration was a top priority.
“Often people talk in terms as if somehow we are leaving the EU but we still want to kind of keep bits of membership of the EU. We are leaving. We are coming out. We are not going to be a member of the EU any longer,” she said. “We will be able to have control of our borders, control of our laws.” My said.
Such demands are incompatible with EU rules and investors interpreted that Prime Minister May would forgo access to the single market in order to control the borders.
Some such as Kathleen Brooks, a research director at brokers City Index noted that the writing was on the wall for the pound even before Theresa May’s comments,
“After some respite at the end of last year, the market was betting against the sterling even before Theresa May gave her interview on Sunday, suggesting that until a clear plan is presented by the government, the market’s fears dominate that Brexit will be a disaster for the UK,” she said.
From a technical perspectival the picture is also pretty grim for the pound and break below the $1.2000 mark can be expected,
"The longer-term technical picture looks very unsteady for the pound. We spot resistance intraday at 1.2175/80 and support at 1.2115. We think a daily close below 1.2175 will tip the balance of risk in favour of a renewed push lower to retest 1.1950/55. We favour selling minor GBP rallies from here," noted analyst Shaun Osborne at Scotiabank.