The pound soared yesterday as British Prime Minister Theresa May laid out her 12 guiding principles on Brexit. She confirmed that the UK will be out of the single market in what essentially amounts to an impending hard Brexit. In the past, whenever Theresa May talked about Brexit, and hinted towards a hard Brexit, sterling plummeted. But yesterday as she confirmed it would be happening, the pound surged.
Peter O'Flanagan, head of trading with Clear Treasury in London, said sterling had positioned itself for a hard Brexit since the start of the year and it faced consistent selling on news and rumour. "The tone of Theresa May's delivery yesterday was was more amicable than some had believed and more conciliatory, despite the hard Brexit. She seems to want to leave the door open to fair negotiations," he said.
Yesterday's conference coincided with inflation figures in the UK which were higher than expected and the rate is moving rapidly towards the Bank of England's inflation target of 2%. "If we were to rule out Brexit, we'd be expecting sterling to be a lot stronger on these inflation figures. The Bank of England would have to raise rates to combat inflation. The bank is in a bit of a bind now as it will want to remain somewhat accommodative to ease Brexit pressures. But there still remains the possibility of a rate hike in the UK by year end," he explained.
Peter O'Flanagan pointed out that the other factor that had to be taken into account when considering the apparent surge in sterling yesterday is the dollar weakness in recent days. "The dollar position is very interesting since Trump campaigned quite strongly against a strong dollar. The rally in the dollar after the vote was quite surprising. He suggested in recent days that a strong dollar was hurting US business. We saw a decline yesterday in the dollar index as a result of those comments. I wouldn't be surprised to hear more from Trump on this," he stated.
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MORNING BRIEFS - The UK's biggest mobile operator has been fined £2.7m by the telecoms regulator for overcharging thousands of customers. Ofcom said EE had charged customers £1.20 a minute for calling customer services while roaming in the EU - the rate should have been 19 pence. It also continued to bill customers for the service for two months after it was supposed to have been provided free.
*** A Dublin based digital health company that provides online counselling and behavioural healthcare has secured just over $8m in a round of funding. SilverCloud was founded in 2012 as a spin out company arising from a collaboration between the National Digital Research Centre, the Mater Hospital and Trinity College Dublin. The funding round was led by Facebook co-founder Eduardo Saverin. SilverCloud has supported over 80,000 patients across around the world in the four years since its inception.
*** A jump in the price of oil was the main driver of a 6% increase in the Bord Gais Energy Index for the month of December. Oil prices were 13% higher driven by the agreement by OPEC countries to cut production. The price of a barrel of crude averaged at nearly $57 a barrel for the month. This time last year they were averaging at around $27 dollars. Tempering that increase in December was a 4% fall in the gas price amid mild weather.
*** It appears Donald Trump was to blame for a 14% drop in sales at Tiffanys' Fifth Avenue store over the Christmas period. The jeweller experienced a huge drop in traffic through the doors of its flagship store given that it is next door to Trump Tower. Trump Tower has been the focal point for protests and it has been surrounded by security cordons since November. Shares in Tiffany were down 4% in trade overnight.
