The pound is charging after May confirmed Britain will leave the single market

Theresa MayBritain’s Prime Minister Theresa May visits HMS Ocean in Manama, Bahrain December 6, 2016.REUTERS/Stefan Wermuth

LONDON — The British pound is surging after Prime Minister Theresa May delivered her first major speech outlining the kind of Brexit the government and confirmed Britain will leave the European Single Market.

May confirmed that Britain is heading towards a “hard Brexit” — shorthand for taking Britain out of both the European Single Market and Customs Union in order to gain full control over EU immigration to the UK.

The prime minister told an audience of foreign diplomats and ambassadors that she will terminate Britain’s membership of the free-trade area, saying: “What I am proposing cannot mean membership of EU single market.”

You can see the key points from her speech here.

Sterling tanked over the weekend on initial press reports that it was likely to enact a “hard Brexit.” Markets had expected a further fall in sterling during the speech, however after Downing Street briefed members of the press about the contents of her speech, the pound began to climb, and continued to do so during the speech.

As of 12.50 a.m. GMT (7.50 a.m. ET), around 20 minutes after May ended her speech, the pound is trading at 1.2344 against the dollar, a gain of more than 2.4% on the day. Here is the chart:

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Investors seem to be taking some comfort from May’s confirmation that both the House of Commons and the House of Lords will be given the opportunity to vote on Britain’s final Brexit deal, adding a moderating influence into the dealmaking process.

Sterling earlier gained additional support from a fall in the dollar after comments from US President-elect Donald Trump that the USA’s currency is “too strong.”

“Our companies can’t compete with them [Chinese companies] now because our currency is too strong. And it’s killing us,” Trump told the Wall Street Journal.

Sterling’s gains earlier this morning were aided by a slew of short covering — where traders buy the pound to cover their short positions against losses — in the markets. As Accendo Markets’ Mike van Dulken writes in his morning commentary email:

“This is on the premise that the big news is already out there, and surprises limited, following what must be have been a ‘strategic leak’ of the PM’s Brexit blueprint speech today, one which confirms a clean-break from the EU and suggests a roadmap for Brexit does exist. The leak was clearly designed to offer some clarity (hard Brexit), making up for recent criticism of government muddling and designed to counter recent volatility in the UK currency.”

Sterling also received an additional boost after higher than expected inflation figures were released by the Office for National Statistics. Consumer Price Inflation hit 1.6% in December against a forecast of 1.4%.

Elsewhere in the UK’s financial markets, the FTSE 100 has lost some ground since May started to speak, dropping from around 7,306 points at 11.45 a.m GMT to around 7,286 points now, as the chart below illustrates:

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UK bond yields ticked a little higher during the speech also, with the benchmark 10-year Gilt yield climbing around 0.3 basis points:

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