By Eamon Quinn
Sterling was left nonplussed after Theresa May’s keynote speech at the Conservative Party conference yesterday, which was seen as buying some time for the embattled UK leader as crunch talks with the EU over Brexit draw ever closer.
The speech, which she delivered after dancing onto the stage to Abba’s ‘Dancing Queen’, reflected the twin threats facing the prime minister, said Joshua Mahony, market analyst at online broker IG.
“Theresa May danced her way into investors’ minds, with the prime minister promising the end of austerity. The need to battle on both Brexit (Boris Johnson) and austerity (Jeremy Corbyn) highlights the fact she is facing challenges from both the opposition and from her own side,” said Mr Mahony.
Following the speech, the British Irish Chamber said it wanted “an urgent deal” on the so-called backstop to protect Ireland from a hard Brexit and for more focus to be put on trade on services, not only exports and imports of goods, across the Irish Sea in the coming weeks.
Chamber director general John McGrane said it welcomed Mrs May’s bid to seek an “agreed outcome on Brexit”.
“The deeply divided nature of British politics has made it increasingly difficult to craft a political deal on the Northern Ireland backstop arrangement and to agree a way forward on trade. There is now an urgent need for unity to successfully negotiate a deal with the EU in the coming weeks,” he said.
“However, it is disappointing that the prime minister did not provide more detail on the future trading relationship with the EU. Despite the previous commitment to a deal on goods, we remain concerned that the services sector is not getting the attention that it requires.”
Ms May said she was confident Britain can agree on a deal for its exit with the EU, although she cautioned that she would rather leave without a deal than accept the carve-up of the UK, a reference to the North.
Sterling slipped as Mrs May pledged to stick with her Brexit plans when the UK and the EU enter another round of negotiations on their divorce.
“In between dancing onto stage and criticising the Labour Party, there was little fresh rhetoric today from Theresa May on her stance on Brexit,” said Hamish Muress, currency analyst at OFX.
The market reaction was muted, and despite a small wobble, the pound’s response was not as pronounced as we have seen in the last few weeks.
Sterling was little changed at 88.99p against the euro. Against the dollar, it dropped 0.4% to $1.296, before recovering to $1.299.
Sterling has been hit hard by concerns over a growing conflict within her party over Mrs May’s Brexit plan, with the pound falling to its lowest point since September 10 earlier in the week.
Analysts said there was little to excite currency traders in Mrs May’s speech, with attention shifting to the next phase of talks with Brussels.
“Nothing new of substance on Brexit... $GBP markets now looking to upcoming Brexit talks. Most interesting thing may be ‘end to austerity’ preview of a slightly more expansionary UK budget,” tweeted Viraj Patel, an analyst at ING.
A survey showed Britain’s services sector kept up its steady growth in September but uncertainty about the UK economy remained high six months ahead of Brexit.
Additional reporting Reuters.
