Expensive speech

PM's Brexit speech part 1

Having had to share the wooden spoon with the Japanese yen on Friday, sterling put considerably more effort into its retreat in the Far East this morning. It is lower across the board and down by an average of -1.2%. And all because of a speech that hasn't been made yet.

On Thursday afternoon Downing Street announced that the prime minister will be making a speech on Tuesday to reveal some of the government's thinking on leaving the EU. Putting two and two together to make five, investors decided she would say Britain will leave the single market, the so-called "hard" Brexit, so they marked sterling down by half a cent against the Euro and the Dollar. It stayed down, opening on Friday morning an average of -0.7% lower on the day.

The Pound spent the Friday session in London going nowhere, save for a lunchtime dip which corrected itself during the afternoon. The day's only significant economic data came from the States, where retail sales were a touch less robust than expected, as was consumer confidence.

PM's Brexit speech part 2

The Sunday papers stirred things up once again with predictions of what Mrs May might say tomorrow. Their general drift was that she will talk of leaving the single market and the customs union as a necessary cost of restricting immigration. The Pound gapped a cent lower when it opened in the Far East.

It appears that the question uppermost in investors' minds now is not whether Brexit will be a soft or a hard one but, rather, its degree of hardness. The chancellor's interview with Germany's Welt am Sonntag contributed to that impression when he appeared ready to set Britain up as some sort of tax haven as an alternative business model to that of single market membership.

A chink of light for the Pound came when Michel Barnier, the EU's chief Brexit negotiator, said on Friday that he wanted the remaining 27 to have continued ease of access to the City of London. But it was not a very bright chink. Compared with Friday morning's levels the Pound starts this week an average of -2.6% lower against the other dozen most actively-traded currencies. It is down on the day by one and a quarter US, Euro and Swiss cents.

PM's Brexit speech part 3

A sparsely-populated agenda today will give investors ample time to reconsider the Pound's reaction earlier this morning. There are three ways it could go.

1. They could decide they want a piece of the action and join the sellers, sending the Pound yet lower.

2. They could resign themselves to having missed it, leaving sterling to potter along at its new, lower levels until the prime minister actually reveals the government's Brexit intentions.

3. They could come to the conclusion that there is a bit of expectations management going on and that tomorrow's speech will be less sensational than has been suggested.