The pound sold off after Prime Minister May announced she has reached an agreement over the border and confirmed there would be no hard border. Many feared a hard border would reignite the troubles in Ireland and undo years of progress.
From a market perspective, the inability to reach a deal was raising concerns the entire Brexit negotiations would be fraught with hurdles created by stubbornness from both sides.
‘Deal Confirmed! Ireland supports Brexit negotiations moving to Phase 2 now that we have secured assurances for all on the island of Ireland – fully protecting GFA, peace process, all-Island economy and ensuring that there can be no hard border on the Island of Ireland post Brexit’ said the Irish deputy Prime Minister.
The pound sold off in the initial reaction in a ‘buy-the-rumour-sell-the-fact’ reversal of significant strength in the run-up to the announcement.
GBP/USD touched lows at 1.3320 on Thursday before exploding to highs of 1.3510 on Friday morning. At the time of writing, GBP/USD was trading at 1.3415.
Despite the fanfare surrounding today’s announcement, upcoming trade talks will be crucial to the strength of sterling and today’s agreement is a mere drop in the ocean of complex negotiations.
