MPs to give Brexit the go-ahead?
Yesterday’s main event was the Supreme Court ruling and Sterling rallied in the build up, peaking at 1.1673 against the Euro as news broke that the government had lost its appeal to trigger Article 50 without parliamentary approval.
The subsequent fall in the Pound confounded some as typically the UK currency has welcomed greater parliamentary scrutiny of the Brexit process. The government’s appeal was largely expected to fail and so had already been priced in by the markets. Sterling’s rally of more than 4% in the week leading up to the decision was enough to prompt profit taking, weakening the Pound.
Brexit Minister, David Davies stated that legislation would be presented to parliament within the next few days. The Labour Party announced that it would not block the move to trigger Article 50.
The latest UK Government borrowing data was slightly better than expected with revenue holding firm and there was no adverse market impact as spending remained under control. Overall Sterling confidence held firm with a move back above 1.2500 against the Dollar as the Euro failed to hold above the 1.1630 level. There will be a growing focus on next week’s Bank of England inflation report and policy meeting which will inevitably have an important impact on the Pound.
The US flash PMI reading rose to 55.1 with a further robust gain in employment, but exports remained subdued. The existing home sales data was weaker than expected and there was a stronger than expected reading for the Richmond Fed manufacturing index. The data overall maintained confidence in the US outlook which underpinned Dollar confidence.
Donald Trump is expected to sign several executive orders regarding immigration and border security over the next few days. This follows the orders signed already on jobs and trade.
Yesterday’s Eurozone PMI manufacturing data release for January was the strongest reading for almost six years, up to 55.1 from 54.9 previously. However, the services sector release was slightly below expectations. A stronger US Dollar across the board pushed EURUSD to the downside falling to 1.0730. Next of relevance for the Euro remains the German Ifo business climate surveys coming out today, with the single currency expected to be saved by a slight improvement in Germany’s business morale.
Data to watch: 9am EUR German IFO Business Climate, Current Assessment, Expectations. 2pm US Housing Price Index (Nov). 1.30pm EIA Crude Oil Stocks Change.