Pound falls on reports Westminster to push for hard-Brexit

News that the Prime Minister was to say in a speech the UK was ready to withdraw from the European single market and that it would seek to regain its independence from the European Court of Justice, sent Sterling back towards its post-Brexit lows.

The report in The Sunday Times saw cable drop 1.47% to 1.2007 as of 0719 GMT, after having hit an low of 1.1988 in overnight trading - its lowest level since 7 October.

On that ocassion it hit 1.1841, its weakest mark since 1985, according to Bloomberg data.

To take note of, losses in the currency came amid thin liquidity conditions overnight which would likely be made worse by the Marting Luther King Jr. holiday in the States, which meant many FX traders would be away from their desks.

May was also expected to say the country was pulling together behind the effort to make Brexit work.

Weakness in the pound ensued despite remarks from Brexit Secretary David Davis that Britain would also aim for a transitional phase during which to implement the new trading relationship.

"We don’t want the EU to fail, we want it to prosper politically and economically, and we need to persuade our allies that a strong new partnership with the UK will help the EU to do that," Davis said.

"If it proves necessary, we have said we will consider time for implementation of new arrangements."

In parallel, in an interview with Welt am Sonntag, the Chancellor said that: "If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term.”

"In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do."

In the background, traders were also looking out to a High Court decision later in the month on Brexit, pushing so-called one-month implied volatility for the British pound from 12.025 on 13 January to 13.325 on Monday morning, and a speech later in the day from Bank of England Governor Mark Carney at the London School of Economics.

"The binary nature of the market reaction thus far in terms of being negative for the pound, appears to be slightly contrary to recent comments from Bank of England governor Mark Carney that Brexit isn’t the main threat to the UK economy at this point in time, but financial instability in Europe. Mr Carney may well expand on these comments in a speech later this evening.

"[...] Soon after her speech Theresa May will head off to the Swiss Alpine Resort in Davos, one of the only G7 leaders to do so, and the annual junket of the World Economic Forum, which starts tomorrow. While many have started to question the relevance of a forum that remains completely disconnected to the problems of ordinary people, her visit will still give her the opportunity to meet Chinese leader Xi Jinping who will be attending for the very first time," said Michael Hewson, chief market analyst at CMC Markets.