Parliament decides! (And by that we mean the UK Parliament, sorry Nicola)
Sterling benefitted from a more positive tone surrounding the Brexit negotiations following a broadly favourable response to the Prime Minister May’s speech on Brexit last week. Sterling tested resistance above the 1.2500 level for the first time in over five weeks and pushed as high as 1.1630 against the Euro.
There was no data of note yesterday, with trading mainly based on speculation surrounding today’s Supreme Court ruling. We now know that the judges have ruled that the government cannot trigger Article 50 without a parliamentary vote. The Supreme Court also ruled that the Sewel Convention does not give devolved parliaments the power to veto Article 50. The summarised judgement can be found here.
President Trump’s economic policies were the main focus for Dollar traders yesterday. In comments after meeting corporate leaders, Mr Trump stated that there would be “massive” corporate tax cuts and a reduction in regulations of up to 75% if American companies kept jobs within the US. There were no details on personal taxes and protectionist fears tended to overshadow other market elements.
Later today, US Markit Manufacturing PMI is released, followed by Existing Home Sales and the API’s weekly report on US crude stockpiles.
The Bundesbank has stated that German inflation could hit 2% in January due to the impact of higher energy prices. Higher inflation would maintain pressure from the Bundesbank to curb the European Central Bank (ECB’s) quantitative easing via a tapering of bond purchases or a complete ending of the programme.
A Bundesbank study suggested that the announcement of QE pushed the Euro weaker by around 6.5% against the Dollar, but that actual purchases had little overall impact. Eurozone consumer confidence strengthened slightly to -4.9 for January from -5.1 previously, the strongest level for close to two years.
Data to watch: 8.30am EUR German Markit Services Manufacturing,Services & Composite PMIs. 9am Euro Markit Services Manufacturing,Services & Composite PMIs. 9.30am UK Supreme Court Hearing. Public Sector Net Borrowing (Dec). 2.45pm US Markit Manufacturing PMI (Jan).