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First Brexit, now Indyref2?

First Brexit, now Indyref2?

Sterling recovered slightly versus the Dollar during yesterday’s European trading session amidst all of the uncertainty surrounding the UK’s economy. The SNP’s Nicola Sturgeon has announced a new Scottish Independence Referendum Bill which is likely to maintain a very fragile tone for the Pound.

Also, the High Court is considering whether ministers can invoke Article 50 of the Lisbon Treaty, the trigger for formal Brexit talks, without MPs passing a new law. The Pound has ended the day up by 0.3% against the Dollar at around the 1.2220 levels and 1.1080 versus the Euro.

The Euro versus Sterling is on the path to parity, as analysts speculate that the pair could possibly reach the 0.9500 (GBPEUR 1.0525) mark. Thursday’s European session lifted the Euro to a high against the Pound and the pair remained fairly stable for the day at 0.9050 (GBPEUR 1.1049). Although considering the Euro’s gain versus the Pound, a near 10% increase since August, the future of the pair still remains volatile and unstable.

The German CPI data and Harmonised Index hit their targets across the board, indicating that inflationary pressures and consumer confidence in spending have remained positive. Europe’s top car manufacturer Volkswagen AG has lost market share for the 13th consecutive month following the Brexit result, and continues to affect overseas trade within the Eurozone.

The Dollar rose in overnight trade and was on track for a weekly gain, though just shy of weekly highs, as investors awaited U.S. retail sales data and remarks from Federal Reserve officials.The number of Americans filing for unemployment held onto its lowest level since 1973, indicating labour market strength that could encourage the Federal Reserve to raise interest rates before the end of the year.

Thursday’s report from the Labour Department reinforced the general view that economic growth has picked up in the third quarter after a slow performance in the first six months of the year. Initial claims for state unemployment benefits were unchanged at a seasonally adjusted 246,000 for last week.

This could cement expectations of a U.S. interest rate hike this year. The Dollar index, which tracks the Greenback against a basket of six major rival currencies, added 0.3 percent. This was below a seven-month high, but still up one percent for the week, and up more than two percent for the month so far, giving the US Dollar some strength across the board.

Data to watch: GBP BoE’s Governor Carney speech, 9:00am EUR Trade Balance n.s.a, 12:30pm USD Retail Sales (MoM), 2:00pm USD Reuters/Michigan Consumer Sentiment Index, 5:30pm USD Fed’s Yellen Speech, 6:00pm USD Monthly Budget Statement.

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