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Theresa May triggered Article 50 of the TEU yesterday via a six-page letter, which you can read here. And European Council President Donald Tusk confirmed receiving the letter via Tweeter.

I guess Trump’s Tweeter Tactic is becoming a thing now? Anyhow, the process for an actual Brexit has therefore finally begun.

Keep Calm

Aside from being a formal notice of the UK’s intention to leave the EU, the letter also outlined the UK’s plans for approaching the negotiation table with regard to the divorce proceedings, as well as “the deep and special partnership” that the UK hopes to enjoy once the divorce proceedings are completed.

And here are the key takeaways from the letter that you need to keep in mind for the future.

Conciliatory tone

Theresa May hopes that the UK and EU would “engage with one another constructively and respectfully, in a spirit of sincere cooperation.”

May then went on about how nice she was to other EU leaders, as well as promising that there would be no “cherry picking” on the UK’s part. She also affirmed that the UK is leaving the EU single market and that the UK knows that there are gonna be consequences.

Devolved governments have no say

Theresa May made it clear that “From the start and throughout the discussions, we will negotiate as one United Kingdom.” This seems to be a subtle jab at Nicola Sturgeon’s call for another Scottish independence referendum before an actual Brexit comes to pass.

Even so, May had a compromising tone, since she also wrote that the UK government will take “due account of the specific interests of every nation and region of the UK.”

Moreover, May said that when powers do finally return from the EU to the UK, then there would be a consultation on which powers “should reside in Westminster and which should be devolved to Scotland, Wales and Northern Ireland.”

The end result of all this is that there “will be a significant increase in the decision-making power of each devolved administration.”

This appears to be a concession (or a carrot on a stick, if you’re more cynical) to encourage the devolved governments of Scotland, Wales, and Northern Ireland to behave themselves during the Brexit process.

In simpler terms, let the UK government do all the talking, and you may get more powers later. M’kay?

Sturgeon’s reaction to the Brexit trigger shows that Sturgeon is not a happy camper, however. Although that could just be political posturing on Sturgeon’s part.

May wants a trade deal parallel to divorce proceedings

Theresa May acknowledged that addressing the issues of the divorce proceedings will “be an early priority.” However, May informed the EU that she intends to “work towards securing a comprehensive agreement.”

To this end, May proposes a “bold and ambitious Free Trade Agreement” between the UK and the EU, and that “it is necessary to agree the terms of our future partnership alongside those of our withdrawal from the EU.”

In simpler terms, May wants to negotiate and secure a trade deal during the divorce proceedings. Unfortunately, this could be a source of conflict during the negotiation process, since EU leaders have been expressing their distaste for the idea.

German Chancellor Angela Merkel, for example, said the following shortly after May’s letter was delivered:

“The negotiations must first clarify how we will disentangle our interlinked relationship. Only when this question is dealt with can we – hopefully soon after – begin talking about our future relationship.”

In short, divorce first, deal later. Looks like we’ve got a potential source of future drama (and pound volatility hopefully).

High priority on citizens’ rights

Theresa May was annoyed when the House of Lords introduced an amendment to the Brexit Bill that protected the rights of E.U. citizens. That amendment got shot down of course.

But in her letter, May noted that “We should always put our citizens first.” She then admitted that “There is obvious complexity in the discussions” that are about to take place. Even so, “the heart of our talks are the interests of all our citizens.”

As such, both the UK and the EU “should aim to strike an early agreement about their rights.”

May wants phased implementation ASAP

Theresa May stressed that it would be in the best interests of both the UK and the EU to “work together to minimise disruption and give as much certainty as possible” in order to “avoid any cliff-edge.”

As such, people and business in both the UK and the EU “would benefit from implementation periods to adjust in a smooth and orderly way to new arrangements.”

And it would be best if both sides agree on this “early in the process.”

Theresa May has already talked about this before, during her January 17 speech.

In that speech, May rejected the idea of a transitional deal because she does not want the UK and the EU to be “stuck forever in some kind of permanent political purgatory.”

Instead, she’s offering a “phased process of implementation” to give business, institutions, and individuals enough time to adjust.

Some veiled threats

There were what appeared to be some veiled threats about the consequences of making the UK leave empty handed.

And here is the part that’s cited most often by media outlets.

“If, however, we leave the European Union without an agreement the default position is that we would have to trade on World Trade Organisation terms. In security terms a failure to reach agreement would mean our cooperation in the fight against crime and terrorism would be weakened.”

I guess the EU needs the help of James Bond in these dire times, huh? Gotta fight them terrorists!

The best James Bond ever!

All joking aside, Theresa May’s veiled threats were actually very mild compared to her January 17 speech, wherein Theresa May went on an awesome and very blatant “you need us more than we need you” tirade.

Here are some amusing excerpts from the January 17 speech:

“And – if we were excluded from accessing the Single Market – we would be free to change the basis of Britain’s economic model. But for the E.U., it would mean new barriers to trade with one of the biggest economies in the world. It would jeopardise investments in Britain by E.U. companies worth more than half a trillion pounds. It would mean a loss of access for European firms to the financial services of the City of London. It would risk exports from the E.U. to Britain worth around £290 billion every year. And it would disrupt the sophisticated and integrated supply chains upon which many E.U. companies rely.”

“Important sectors of the E.U. economy would also suffer. We are a crucial – profitable – export market for Europe’s automotive industry, as well as sectors including energy, food, and drink, chemicals, pharmaceuticals, and agriculture. These sectors employ millions of people around Europe. And I do not believe that the E.U.’s leaders will seriously tell German exporters, French farmers, Spanish fishermen, the young unemployed of the Euro Zone, and millions of others, that they want to make them poorer, just to punish Britain and make a political point.”

Still, that was enough to make some EU officials lash out in anger against what they perceive to be Theresa May’s use of blackmail to gain an edge in the negotiating table.

The Pound’s Reaction

GBP/USD: 15GBP/USD: 15-Minute Forex Chart-Minute Forex Chart
GBP/USD: 15-Minute Forex Chart

The market has been pricing in this event for months. Also, the pound did tank in the wake of the vote in favor of backing another Scottish independence referendum the day before.

As such, the pound had a bullish boost before the delivery of the Brexit letter was announced, very likely because of short covering. The pound then got another lift when Theresa May addressed Parliament, informing them that the Brexit process has finally started.

After that, pound pairs went into consolidation mode, as forex traders waited for the EU’s official response. And Donald Tusk has said in the past that a response would likely be coming within 48 hours of receiving the letter.

Bonus: Leaked European Parliament Resolution

I should let you know at this point that the Guardian supposedly has a leaked copy of the European Parliament resolution which outlines how the EU will negotiate with the UK. And, well, it’s appears as if the EU wants to give the UK a hard time. You can read it here, if you’re really interested.

The provisions in the supposed leak do somehow line up with what EU officials have been saying, though, so it’s possible that the leak is the real deal.

For example, Brexit negotiator Guy Verhofstadt warned yesterday that it would be unacceptable for the UK to start bilateral trade talks with non-EU countries during the divorce proceedings.

And in the leaked resolution, we can find the following provisions:

“It would be contrary to EU law for the united Kingdom to begin, in advance of its withdrawal, negotiations on possible trade agreements with third countries; stresses that such an action would be in contradiction with the principle of sincere cooperation laid down in Article 4(3) TEU and should have consequences among which the UK’s exclusion from procedures for trade negotiations.”