The UK triggered Article 50 and began the two-year countdown towards the exit from the European Union. A 6-page letter from Her Majesty’s government was received by the European Commission at 13:30 in Brussels, 12:30 in the UK.
And what happened? With the privilege of a few hours of hindsight, we can say that the reaction is muted. Sterling dropped ahead of the triggering on reports of a strict European stance. The EU s set to focus on the divorce details first, new trade relations later.
GBP/USD dropped to as low as 1.2376 before bouncing back and going as high as 1.2475. A range of 100 pips is not huge, but as the dust begins settling, cable is lower than where it traded beforehand.
At 1.2420, the pair is around 200 pips lower. A correction in the USD is part of the story, but the main story is that Brexit is bad. The shorts were not vindicated with a downfall of the pound but were not squeezed either.
The analysis that accompanied the event discussed a conciliatory tone. But this was no consolation for the pound. Yet even with a relaxed tone, it is no secret that the EU is the bigger side in the negotiations and the UK is the one with more to lose. This was seen today in sterling.
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Here is how Brexit week looks so far on the GBP/USD chart.
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