BrexitJul 9 2018

Pound and stocks rise as Davis resigns as Brexit secretary

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Pound and stocks rise as Davis resigns as Brexit secretary

The resignation of David Davis from his role as secretary of state for Brexit in the UK government has caused the value of sterling and the UK stock market to rise.

The FTSE 100 is up about a quarter of a per cent since opening this morning (9 July), while sterling is at a three-week high against the dollar.

The pound remained higher after news of Mr Davis’ resignation, having risen after the terms of the Chequers accord on Brexit emerged.

Sterling was up 0.6 per cent at $1.3354 this morning.

Against the euro, the pound was 0.3 per cent stronger, with £0.8816 required for a unit of the shared currency. 

Mr Davis told the BBC this morning that he was no longer the best person to deliver prime minister Theresa May's Brexit plan stating that he did not believe in it adding the UK was "giving away too much and too easily" to the European Union in the negotiations.

Mrs May said she did not agree with Mr Davis but thanked him for his work.

Mr Davis has now been replaced by Dominic Raab, who is currently housing minister and was a prominent Leave campaigner during the 2016 referendum.

Mr Raab was a lawyer before becoming an MP in 2010 and will now take over day-to-day negotiations with Michel Bernard Barnier, a French politician who is serving as European chief negotiator for the UK exiting the European Union.

Joshua Mahony, market strategist at UK-based financial derivatives trader IG Group, said the market is taking the view that Mr Davis's resignation will lead to a form of Brexit that is more business friendly.

He added that the rise in sterling is also the result of the market interpreting a speech made by governor of the Bank of England Mark Carney last week as making an interest rate rise more likely.

As FTAdviser previously reported, at a speech in Newcastle Mr Carney said economic growth has been much stronger in the second quarter of this year than in the first quarter, and said if the form of Brexit is business friendly, then the likelihood is the base rate will increase soon.

David Cheetham, senior market analyst at financial traders XTB Group, said an increase in the base rate in August would mean sterling would continue to rise.

Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford, said: “No question some companies will be severely detrimentally affected, short to medium term, by Brexit. Others will do fantastically well from Brexit. My outlook is there will be a net benefit, economically, to the UK from Brexit.”

david.thorpe@ft.com