Theresa May’s heavily pre-briefed speech on how the UK will look to leave the EU is something of a first. The pound actually rallied against the world’s other major currencies as she spoke.
In fact, its surge looks to be the strongest one-day rally since the financial crisis.
The currency’s climb is no mere accident. The PM’s people have worked very hard at getting the “hard Brexit” parts of the speech into the mainstream press ahead of May’s delivery of it on Tuesday.
Those early tidbits of information in the British papers caused the pound to slump on Friday and Monday, setting the scene for May to drop a couple of unexpectedly “soft Brexit” bits of news, and sending sterling shooting higher as she spoke.
The leaks did the trick pic.twitter.com/doMegXyQ7M— Sid Verma (@_SidVerma) January 17, 2017
Everyone at No10 seems to have done their job very well.
Journalists who ate up Downing Street’s scraps and regurgitated them whole will look a little foolish, but will not be much worse off for wear. Their reputation may be diminished, but their careers and earnings are unlikely to be in jeopardy.
Traders, however, have been taken for a merry go round ride. Many, it must be said, were anticipating this kind of a trick from the PM. It is clearly embarrassing that the pound has tumbled every time she has opened her mouth. Yet some investors refused to believe that the government would be so willing to trash its credibility. They are likely to be less trusting of No10 in the future.
So then, how should these events be written up for tomorrow’s papers?
A proper account would let the reader know that the pound is no higher than before details of May’s speech were leaked. That in fact, the reason many believe sterling did rally was the PM’s announcement that both Houses of Parliament would be able to vote on, and possibly reject, the coming Brexit deal.
Today's GBPUSD move in context pic.twitter.com/VlBeV33uIB— World First (@World_First) January 17, 2017
Unfortunately, many are instead likely to read that May’s speech was met with tremendous enthusiasm by the markets, as sterling shot up by around 2.5pc, with little mention of the “new” news – the confirmation that politicians will get a say.
The online press has already taken the bait. Articles in The Independent and Business Insider, as well as online posts from The Metro and The Daily Express cheer the pound’s rise on May’s words. At the time this post was published, none attributes the rise to the new information, but to things the market was already aware of.
It is tempting to publish such a tale – as it counters the narrative that leaving the EU weakens the UK’s economy, and therefore the pound. It also appears impressive because of the size of the numbers involved, and fits with the press inclination to report changes over one-day periods.
Downing Street has played journalists marvellously. If we are lucky, only a couple of tomorrow’s papers will show that editors have fallen into the trap.