Sterling slips from recent highs as Theresa May triggers Article 50

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29 March 2017

Matthew Ryan

Senior Market Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

The Pound lost ground against its major peers on Tuesday, as investors braced themselves for the long awaited triggering of Article 50 today.

heresa May will formally notify President of the European Union Donald Tusk of Britain’s intention to leave the bloc just after midday today, over nine months after the UK voted in favour of Brexit in last June’s referendum.

The reaction in the FX market is highly uncertain. We could see a knee-jerk sell-off in the currency as the exit process finally becomes a reality. However, with the market now fully prepared for the eventuality, Sterling could retrace its losses fairly quickly and the reaction itself could prove fairly limited. Regardless of the initial reaction, the Pound is in for another very volatile few months as initial news on the terms of the Brexit deal begins to materialise.

Meanwhile, recent hawkish comments from a handful of Federal Reserve members helped the Dollar recover from its four month low against its major peers yesterday. Dallas Fed President Robert Kaplan threw his support behind further rates increases this year, although claimed they would likely be gradual. Fellow members Kaplan and George stuck both struck a slightly more cautious tone, while Chair Janet Yellen disappointed investors by failing to touch on monetary policy.

Consumer confidence in the US also massively exceeded expectations yesterday, providing a further boost to the Dollar. The confidence index unexpectedly surged to its highest level in 16 years (Figure 1), further reinforcing our view that a solid economic performance in the US should support the case for at least three rates hikes by the Federal Reserve in 2017.

Figure 1: US Consumer Confidence Index (2008 – 2017)

Major currencies in detail


Sterling sank 0.75% against the US Dollar yesterday ahead of today’s Article 50 trigger. The move was likely due to profit taking ahead of today’s heavily telegraphed announcement.

With the Article 50 triggering fully priced in, attention is likely to quickly turn to what kind of impact the Brexit process will have on the UK economy. We still think the market is overly pessimistic on the negotiations, although of course it will likely be a number of months before any kind of significant details on the discussions begin to filter through to the news headlines.

With Article 50 to be triggered today, all other economic and political announcements in the UK will take a back seat.


There was very little economic or political news out of the Eurozone on Tuesday, although the currency sank 0.6% on broad US Dollar strength.

The limited moves in the Euro came despite the latest French Election poll from IFOP. The poll suggested that the race to be the next President in the Eurozone’s second largest economy would be marginally tighter than originally expected. Centrist Macron is expected to defeat Le Pen in the second round, although the margin of victory has narrowed somewhat to a still fairly sizable 20%.

Consumer confidence out of France and German import prices will be the only major data releases today. Investors await Friday’s Eurozone inflation figures, which could give us an idea as to the likelihood of higher interest rates by the European Central Bank this year.


The greenback steadied itself from its lowest level since November against its major peers. The US Dollar index ended trading 0.5% higher following an impressive set of confidence data.

The consumer confidence index jumped to 125.6 in March from an upwardly revised 116.1, its highest level in the US since December 2000. Consumers remain optimistic about the prospect of faster economic growth in the US under the Trump administration and an improvement in the labour market that has seen both unemployment and jobless claims fall to multi-year lows.

Federal Reserve member’s Evans and Williams will both be speaking in the US this afternoon in a particularly busy week of central bank communications.