The pound sterling rose to an eight-day high in the wake of Brexit discussions at Chequers. UK Prime Minister Theresa May was attempting to unite her government over Brexit plans.
But it plunged after news later in the day that foreign secretary Boris Johnson had resigned.
Timeline for Brexit
Details of the deal brokered by May were announced after markets closed on Friday. The Prime Minister managed to secure the backing of her cabinet to pursue what is being seen as a soft Brexit deal.
Part of the proposal is to “create a UK-EU free trade area which establishes a common rulebook for industrial goods and agricultural products”. This would enable close trade ties to preserve frictionless goods trade between Britain and the EU.
Concerns over soft Brexit fail to impact markets
However, the proposal has sparked opposition from hardline Brexiteers who fear this could prevent a UK trade deal with the US which has different standards in goods and foods.
Despite some remain and hard-Brexit-backing MPs being unhappy with the arrangement, May’s demand for a unified stance had the potential to bring about some stability and certainty over Brexit negotiations.
However, the sudden resignations of Brexit Secretary David Davis and his deputy, Steve Baker, as of this morning, have called this stability into question.
Davis, who has been leading the UK negotiations to leave the EU, has resigned in response to his belief that May’s government would not be able to deliver on its “manifesto commitment to leave the Customs Union and the Single Market”.
This has raised questions over whether May’s plan could survive a Commons vote, or if she will face a challenge to her position.
Trading has not been heavily affected by these events, however. The pound has strengthened slightly against the dollar and the euro following the news.
Rebecca O’Keeffe, head of investment at interactive investor, said: “The Brexit secretary may be a bit disappointed that far from the market being devastated by the news, investors have shrugged off his departure.” This could reflect traders taking the news of Davis’ departure as a sign that soft Brexit is increasingly more likely.
Pound sterling, FTSE100 following the Brexit announcements
The pound sterling rose 0.44 per cent against the dollar to a rate of GBP/USD 1.3350 as of midday today (GMT), its best level since 14 June. Sterling also increased 0.25 per cent against the euro to £1.134 per euro.
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In addition, the FTSE100 appears to not have been affected by the recent developments being up 0.25% this morning to 7,636 points.
But the pound slumped following the news at around 3pm that Johnson had resigned from the May government. Gains earlier in the day were rapidly wiped as it fell to £1.125 against the euro before rising to £1.126.
Chart source: Xe.com.