May’s Speech Ambiguity Fuels Disquiet in Volatile U.K. Markets

  • Gauge of overnight volatility climbs to highest since August
  • Lack of clarity on speech timing a ‘major issue’: IG analyst

U.K. Prime Minister Theresa May sparked irritation in financial markets as her office declined to publish a time for Tuesday’s much-anticipated Brexit speech.

Despite saying May will deliver the speech in London on Tuesday, the lack of a fixed time for its delivery risks contributing to volatility in markets, where an overnight measure of anticipated swings for the pound already reached its highest since August on Monday.

“If you’re trading and you have positions on you want to know what time you need to be at your desk,” Chris Beauchamp, a market analyst at IG in London, said in a telephone interview. “It’s a major issue.”

The pound fell, dropping below $1.20 for the first time since October’s flash crash, after the Sunday Times reported May will use Tuesday’s speech to signal plans to quit the European Union’s single market to regain control of Britain’s borders and laws. Government officials said they expected May’s speech to cause a further “market correction,” according to the Sunday Times, which didn’t say how it obtained the information. The currency was 1.1 percent lower at $1.2047 as of 12:24 p.m. in London, after earlier touching $1.1986.

A measure of anticipated price swings for the pound, which jumped when the speech was announced last week, climbed to the highest since August as currency traders sought protection against more turmoil. The measure climbed above 30 percent, a level breached before just three events in 2016, the EU referendum itself, and the Bank of England’s July and August meeting.

With details of the U.K.’s exit strategy remaining scant less than three months before May’s own deadline to trigger formal talks with the EU, traders have previously seen the premier’s pronouncements on Brexit as a trigger to sell the pound, even if she has mainly reiterated existing views.

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