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All that slow uphill progress on Brexit optimism was quickly erased when PM May stepped up to the podium late last week. Will the pound selloff continue from here?

Brexit updates

Pound bulls took off their rose-colored glasses as U.K. PM May laid out the situation and admitted that negotiations weren’t going as smoothly as it seems.

Word on Downing Street is that No.10’s aides are already drafting a contingency plan for snap elections in November as the government struggles to appease the EU and still stick to the agreed-upon Chequers proposal. However, other government sources dismissed these rumors as “categorically not true.”

In any case, reports or remarks that fuel these snap elections expectations might drive the pound further down while some semblance of being on top of things could keep losses at bay. Stay tuned!

Last Week’s Price Review

The pound’s four-week winning streak will likely come to an end this week since the pound is on track to closing out the week in third-to-last place (as of 2 pm GMT).

And if the selling pressure won’t let up, then there’s even a chance that the pound may find itself in last place.

Overlay of GBP Pairs: 1-Hour Forex Chart
Overlay of GBP Pairs: 1-Hour Forex Chart

The pound actually had a promising start and was even the best-performing currency on Monday.

And market analysts were attributing the pound’s strength on Brexit-related optimism, with a report from The Times being cited as the direct catalyst since the report claimed that Barnier and his team are working on a solution to the Irish border issue.

The pound’s rise got capped later on, however, and the pound’s price action became steady but more mixed on Tuesday.

A semblance of uniformity would finally return to the pound’s price action during Wednesday’s London session since the pound jumped broadly higher, only to slump broadly lower a few hours later.

And as noted in Wednesday’s London session recap, the pound’s rise was due to the U.K.’s stronger-than-expected CPI report, while the later slide was due to a report from The Times, which claimed that Theresa May will reject E.U. Chief Brexit Negotiator Michel Barnier’s “improved” proposal for solving the Irish border issue during the meeting in Salzburg.

Of course, we now know that the report was the real deal since Theresa May did reject Barnier’s proposal, calling it “unacceptable”.

Anyhow, the pound slowly drifted lower on most pairs after that slump. However, demand for the pound was revived again during Thursday’s European session.

And as noted in Thursday’s London session recap, the pound got a double boost from the U.K.’s better-than-expected retail sales readings and Conservative Party MP and Cabinet Office Minister David Lidington’s positive comment that:

“The withdrawal agreement – we’re 85 percent…90 percent of the way to fixing the text.”

Unfortunately for GBP bulls, the pound’s rally began to stall during Thursday’s U.S. session. And as noted in Thursday’s U.S. session recap, there were signs that British PM Theresa May’s meeting with E.U. leaders at the Salzburg E.U. summit wasn’t going so well.

And things got worse for the pound from there since the British media machine launched a media blitz against Theresa May on Friday and here are some examples (of many) of what the headlines were about.

And as a parting shot, Theresa May also gave a speech after the media blitz and she basically said that she won’t budge on the Irish border issue:

“The EU is proposing to achieve this by effectively keeping Northern Ireland in the Customs Union. As I have already said, that is unacceptable. We will never agree to it. It would mean breaking up our country. We will set out our alternative that preserves the integrity of the UK.”

“As I told EU leaders, neither side should demand the unacceptable of the other. We cannot accept anything that threatens the integrity of our union, just as they cannot accept anything that threatens the integrity of theirs. We cannot accept anything that does not respect the result of the referendum, just as they cannot accept anything that is not in the interest of their citizens.”

She also repeated her message that the U.K. is ready for a “no deal” Brexit:

“No one wants a good deal more than me. But the EU should be clear: I will not overturn the result of the referendum. Nor will I break up my country. We need serious engagement on resolving the two big problems in the negotiations. We stand ready.”

Incidentally, the pound was actually the third best-performing currency of the week before the media blitz and Theresa May’s speech forced the pound to slump hard across the board.