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Theresa May began her all-important speech by highlighting the joint efforts of the UK and the EU, but her words about the UK “never feeling at home” are not very encouraging for the pound. She does want the negotiations to succeed to be a good partner of the European Union. May says the UK will be out of the single market and the customs union but says no need for new tariffs.  

GBP/USD is down to 1.3530. Update: the new low is already 1.3507. Markets are not convinced.

  • Concrete progress has been made in the negotiations
  • Committed to protecting the Belfast agreement
  • Won’t accept any border in Ireland
  • Significant progress on rights of citizens.
  • “We want you to stay,” says May to EU nationals living in the UK.
  • Wants to reach an  agreement on the ECJ.
  • About the future relationship: life will be different
  • New deep partnership with the EU.
  • We start from an  unprecedented position regarding the new economic partnership
  • UK will leave the single market and the customs union
  • EEA membership means the UK would lose the democratic vote on changes implemented.
  • On CETA: we can do better than that.
  • Wants a “creative arrangement.
  • No need to impose tariffs where none exist now
  • The new partnership will be creative.
  • May moves to security: a treaty between the EU and the UK.
  • We will no longer be in the EU from March 2019.
  • But we will not be able to conclude the arrangements on time.
  • Offering a period of implementation
  • Businesses would benefit from the transition period.
  • There are many things to prepare for.
  • The period should be around two years.
  • Time-limit needed for certainty.
  • Wants further cooperation on security, science, arts, etc.
  • We should cover our fair share of the costs
  • EU partners should not fear.
  • Wants a prosperous future for all.
  • Britain’s economy will always be strong.
  • A failure will be a failure for everybody.
  • UK not trying to obtain an unfair advantage.

Speech over. Questions begin:

  • No deal is still better than no deal
  • But “I set out how we can achieve that today”.
  • Close to a deal about rights of citizens.
  • We set out our ambitions and positions.

Here is the clear fall as it is seen on the 30-minute chart:

UK Prime Minister Theresa May is giving a highly anticipated speech about Brexit in Florence, Italy. The speech is followed by an almost immediate response from the chief EU negotiator  Michel Barnier. May is accompanied by her senior cabinet members: Phillip Hammond (pro soft-Brexit), Boris Johnson (pro hard-Brexit) and David Davis, chief negotiator.

Brexit negotiations have been quite stuck on a variety of issues: the potential border in Ireland, rights of citizens and the “divorce bill”. May was expected to offer a payment of 20 billion pounds and to indicate her desire to stay in the Single Market.

The EU got the UK to agree on “sequencing”: first a resolution of the key exit issues before talking about the future: future trade relations and immigration arrangements. It seems that the EU is treating the UK like Greece.

Pound/dollar was falling ahead of the speech on a report that May could threaten to leave the EU before March 2019. That does not sound very serious. EUR/GBP was around 0.8820.

The pound has been on the up and up thanks to prospects of an imminent rate hike. The BOE is predicted to raise rates in November, reacting to higher inflation and expanding credit.