Sterling on course for most sufficient day since 2008 after May speech

LONDON (Reuters) – Sterling GBP=D4 saw its biggest gains as the 2008 financial on Tuesday as Pm Theresa May promised a parliamentary vote on Britain’s deal end the EU and stated it would attempt to stay the key European partner.

The pound, already up in excess of 1 percent as May began a keenly-awaited speech which was extensively leaked to media, surged 2.5 percent on the day towards 10-day high of $1.2343 in your minutes that followed. GBP=D4

It gained more than 1.5 % to 86.69 pence per euro, with dealers reporting a widespread squeeze on short positions – or bets against sterling – taken in derivatives markets before few days.

One media report within the weekend had quoted a Downing Street source as predicting May’s speech would trigger a serious correction on the pound. Until Tuesday’s action most had assumed that might be downward not upward.

“Theresa May’s greatest trick has been to deliver what is a fairly hard Brexit message without the presense of markets starting a flat spin,” said ETX Capital analyst Neil Wilson.

“Some judicious leaks within the last few couple of days had primed investors for your UK to be leaving the single market. Many expected a tough sounding speech that is going to send the pound lower.”

The FTSE 100 share index, which contains tended to raise as sterling dropped with a series of sell-offs because the vote for Brexit last June, extended first fall led by exporters and mining companies as May spoke. .FTSE

May said she wanted to avoid a “disruptive cliff edge” for businesses when Britain leaves countries in europe and backed a phasing-in of modifications in immigration, customs and regulation in areas which includes financial services.

Analysts and traders said they expected more meat whenever the talks get arrived after Britain triggers the EU’s Article 50 exit process in March.

“May’s speech were without anything new which had been not already known. However, while using pound bouncing, the dollar earners are coming stressed,” said Jawaid Afsar, a senior trader at broker Securequity.

“The speech has given some direction, however, the real test will come when Article 50 is triggered. Stay tuned for more for a bumpy Brexit ride.”

Gilt yields, which can be falling as expectations for future UK growth had concerns within the EU exit talks, rose around 2 basis suggests 1.275 percent for 10-year paper. GB10YT=RR

Overnight implied volatility – a pace of expected swings during the pound expressed through currency options – halved from six-month highs hit on Monday to 13.788 percent. One-week volatility fell from 15.5 percent to around 11.4 %.

“There was many bad news you can get – people were positioned all one of many ways, so there was always a risk (of a squeeze on those positions),” said Ian Gunner, a portfolio manager with Altana within london.

“Some people will say ‘this really is a hard Brexit, however sherrrd like to dress it up’, where there will be criticisms from various politicians. But it’s a clear Brexit, and that’s it is important.”