Key Points Of Brexit Plan

1) PM May views the Brexit vote as a vote to restore parliamentary democracy and for Britain to become even more internationalist. "It was the moment we chose to build a truly global Britain".

2) The first aim of the Brexit strategy is to provide certainty where we can.

3) The final Brexit deal will be put to a vote in both Houses of Parliament.

4) The government will ensure control of immigration to Britain after Brexit.

5) The government will pursue a bold and ambitious free trade agreement with the EU.

6) It can't mean retaining membership of the single market.

7) The government will seek the greatest possible access to the EU which may take in some elements of the single market.

8) The UK will not be required to contribute "huge" sums to the EU budget, but we should make an appropriate contribution.

9) The UK must be free to strike trade deals with countries outside the EU.

10) The government does not want Britain to be part of the common commercial policy, but they do want to have a customs agreement with the EU. It could mean a customs agreement with the EU has to be new or for Britain to be signatory to the agreement.

11) The government wants Britain to be free to establish its own tariff schedules at the WTO, and remove as many tariff barriers to trade as possible.

12) The government will seek to avoid a disruptive Brexit cliff face adjustment and believes a transition will be in the interests of both Britain and the EU.

In light of the update on the UK government's Brexit plans, we have decided to leave our outlook for the pound unchanged for the year ahead. The plans were broadly in line with our expectations and have failed to trigger another adjustment lower for the pound. "Hard" Brexit concerns may have just peaked in the near-term.

We continue to believe that the bulk of the adjustment lower for the pound in response to Brexit concerns has already taken place which leaves the pound undervalued.

The main downside risk for the pound going forward is that the negotiations between the UK and EU could break down thereby increasing the likelihood of a more disorderly Brexit. However, we doubt that talks could break down as early as this year. The conciliatory tone of the UK government's comments and plan for a "cleaner" Brexit have further dampened the risk of a more disorderly Brexit. The market may now find it more difficult to find catalysts for fresh pound selling through the remainder of this year. The market's focus could also shift away from Brexit to upcoming political risks in Europe helping to ease downward pressure on the pound in the coming months. It supports our view that the pound could be close to bottoming in the near-term especially against the euro. We expect EUR/GBP to fall back towards the 0.8000-level and target GBP/USD at 1.2800 into year-end.

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