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Pound falls after May's pitch for Brexit transition

Pound falls after May's pitch for Brexit transition

The pound has fallen after prime minister Theresa May's long-awaited speech in Florence setting our her plans for a two-year transition period after Britain leaves the European Union.

The pound fell 0.5% against the dollar to $1.351, having earlier threatened to fall below the $1.35 mark.

May said she wanted existing EU market access arrangements to apply during the transition period and said Britain would pay its 'fair share' into the EU budget.

The reaction to May's speech snapped a rally for the pound, which has been trading at its highest levels since the day after the Brexit vote on expectations of an interest rate later this year and better-than-expected UK economic data.

'The fact the pound is lower after the speech suggests that May failed to deliver everything that was expected, including the rumoured divorce bill that the UK is willing to pay, although many believe it to be €20 billion,' said Kathleen Brooks, research director at City Index.

'Thus, the EU's response to May's speech is likely to be even more important for UK asset prices.'

Tim Graf of State Street Global Markets, said the pound's response had been muted, 'perhaps an appropriate reaction to a speech carrying very little new information'.

James Knightley, economist at ING, said the speech was 'conciliatory yet thin on details' and likely to receive 'a lukewarm response from the EU'.

'In a long and meandering speech in Florence, we learned little expect ''no deal is better than a bad deal'',' he said.

The pound's fall helped the FTSE 100 rally towards the end of the day's session. Having spent the bulk of the day trading broadly flat, the UK blue-chip index closed 47 points, or 0.6%, higher at 7,310.

A weaker pound tends to boost the FTSE 100, whose members rely on overseas markets fround around three-quarters of their earnings. 

 

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