Sterling on course for most satisfactory day since at minimum 1998

LONDON (Reuters) – Sterling saw its biggest daily gains since at a minimum 1998 on Tuesday as Prime Minister Theresa May promised a parliamentary vote on Britain’s deal to go away from the EU and sought to draw a line under discussion of any “hard” or “soft” Brexit.

The pound, already up greater than 1 percent as May began a keenly-awaited speech that had been extensively leaked to media, surged 2.9 percent on the day to a 10-day high of $1.2398 with the hour that followed.

That was the most significant climb ever in your dealing data – which fits back to 1998 – given by the Thomson Reuters Matching system.

It also gained around 2 percent to 86.31 pence up against the euro, with dealers reporting an extensive squeeze on short positions – or bets against sterling – used in derivatives markets up until recently few days.

One media report around the weekend had quoted a Downing Street source as predicting May’s speech would trigger a significant correction through the pound. But until Tuesday’s action most had assumed that are downward, not upward.

“In paying out the government’s 12 guiding principles on your upcoming negotiations, Mrs May did remove some key question marks concerning government’s approach and promised that each house of parliament would will be able to vote,” said JPMorgan Asset Management strategist Stephanie Flanders.

“This will have reassured investors.”

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

It closed down almost 1.5 %, its biggest daily fall since the days after June’s Brexit vote.

May said she needed to avoid a “disruptive cliff edge” for businesses when Britain leaves europe and backed a phasing-in of variations in immigration, customs and regulation in areas along the lines of financial services.

SHORT SQUEEZE

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

“The main one revelation that separated itself was the intention to place any deal before parliament, which on paper should tip the total amount slightly further away from a hard Brexit,” said Craig Erlam, a strategist with Oanda inside london.

“This triggered a rally on the pound, which will was the catalyst for the short squeeze that followed.”

Gilt yields, that will be falling as expectations for future UK growth suffered from concerns in the EU exit talks, rose by as much as 7 basis points to 1.32 percent for 10-year paper.

Overnight implied volatility – a step of expected swings from the pound expressed through currency options – halved from six-month highs hit on Monday to 13.788 percent. One-week volatility fell from 15.Five percent to around 11.4 %.

“There was a lot of bad news already in the market – people were positioned all a way, so there was always a danger (of a squeeze on those positions),” said Ian Gunner, a portfolio manager with Altana working in london.

“Some people will say ‘that is a hard Brexit, however she’d like to dress it up’, its keep will be criticisms from various politicians. But it’s a clear Brexit, and that’s what is important.”