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May not be an April Brexit

May not be an April Brexit

The UK’s High Court revealed yesterday that the Government must seek parliamentary approval to enact Article 50 Britain’s. The potential delay in launching the Brexit process led to speculation that the government would have to make concessions and play down the potential for a ‘hard’ Brexit. In response, there was a sharp move higher in Sterling with a move above 1.2400 against the dollar.

The Bank of England MPC voted unanimously voted to leave interest rates on hold, with interest rates at 0.25% and the amount of bond purchases of £435bn. The Quarterly inflation forecast showed an upward revision of 2.7% in 2017.The bank reiterated that there would be only limited tolerance to an inflation over-shoot, but significantly removed its forward guidance that a further rate cut was likely and switched to a neutral stance. Sterling surged against the Euro peaking at 1.1280, and topping at 1.2485 against the Dollar.

US jobless claims data printed slightly weaker than expected with an increase to 265k from 258k, although there was a sharp decline in layoffs according to the latest Challenger survey. The latest US employment report will trigger short-term volatility with the key to any longer-term impact depending on whether there is a disruption to Fed tightening expectations. The data would have to be well below expectations to undermine the chances of a Fed rate increase next month. The ISM non-manufacturing index was weaker than expected with a decline to 54.8 from 57.1, although this followed a very strong increase the previous month and it was a firm underlying release which suggests moderate growth.

There were mixed outcomes on Presidential race opinion poll results during the day and, although the latest ABC poll recorded a 2% lead for Clinton, there was still an element of caution, especially with turnout doubts. After finding support above 1.1050, the Euro rallied back above 1.1100 later in the US session.

Data to watch: 9am EUR Markit Services & Composite PMI (Oct). 10am EUR Producer Price Index (Sep). 12.30pm US NonFarm Payrolls & Unemployment Rate. Average Hourly Earnings, Labour Force Participation & Trade Balance. 8pm US Fed’s Stanley Fischer speech.


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