Sterling drops against the dollar and the euro after Theresa May confirms Article 50 trigger date as 29 March
The pound has pared earlier gains against both the dollar and the euro, after the trigger date for Brexit negotiations was confirmed this morning.
Sterling was up against the dollar, hitting around $1.2431, and the euro, at €1.1546, in earlier trading, but has since declined. At pixel time, the pound was at $1.2383 and €1.152 against the dollar and the euro respectively.
The currency movements come in the wake of confirmation from Downing Street that Article 50 will be triggered next Wednesday, 29 March, after the Brexit bill was made law last week when the Queen granted royal assent for the Brexit bill.
Knee-jerk reaction
Analysts at City Index said: "In fairness, we think that today’s dip in the pound is just a knee-jerk reaction to the Article 50 news, and part of sterling’s decline is also due to the recovery in the dollar and US Treasury yields.
"But it is worth watching how the pound performs in the next day or two, if GBPUSD can find support ahead of $1.2350 – a key short-term support level – and recoup today’s losses then it would be a bullish signal for GBP for this reason: the pound is failing to react to 'bad news'."
They added: "Last week the pound actually rallied although the Scottish leader said she will hold a second independence referendum, this is significant as markets that don’t fall on what is perceived as bad news can often rally in the aftermath."
Reaction warning
Last week, Morning Wire asked currency experts for their predictions on what would happen to sterling after the trigger date was announced. Most of them said there would be some volatility, but it wouldn't be a "calamitous event".
However, they warned that the reactions of EU politicians in the coming weeks could have a more dramatic effect on the pound.
Triggering Article 50 will mark the beginning of two years of negotiations, with a spokesperson for the Prime Minister stating that Theresa May is confident talks will stick to a two-year timeline.
David Davis, the secretary of state for exiting the European Union, said: "Last June, the people of the UK made the historic decision to leave the EU. Next Wednesday, the government will deliver on that decision and formally start the process by triggering Article 50."
He added: "We are on the threshold of the most important negotiation for this country for a generation."
