U.K. Chancellor Philip Hammond confirmed on Sunday that the U.K. would drive ahead with plans to leave the single market and customs union. It had been thought that Hammond, a vocal backer of the Remain campaign, could try to use May’s weakened position to promote a softer Brexit and continued membership of the customs union.
Sterling rose Monday morning as talks commenced. It was trading at $1.2796 against the greenback and 87.45 pence per euro around midday.
The British currency had posted a modest rise against both currencies last week ahead of the talks. However, Ray Attrill, co-head of FX strategy at National Australia Bank, said he expects sterling momentum to remain weak if the government continues to pursue a clean break from the union.
“Negotiations will still be towing the hard Brexit line but I wonder whether what we’ll be seeing or hearing 2-3 months months down the tack will be different today….if markets get a sense of a softer Brexit, that will be positive for sterling,” Attrill told CNBC Monday.
– Nyshka Chandran contributed to this report