Sterling
The Pound ticked higher versus most of the majors over the weekend as investors reacted to news that two sets of campaigners were set to launch fresh Brexit legal cases.
The first legal challenge asserts that triggering Article 50 should be revocable – otherwise Britain will be forced to accept whatever trade deal the EU suggests during the two-year divorce process. This case, crowd funded to the sum of £70,000 in just 48 hours, is due to go before Ireland’s High Court.
The second challenge is to be taken to the UK High Court, with campaigners arguing that the government has no mandate to withdraw from the single market because it was not mentioned on the referendum ballot paper or in the Conservative Party 2015 manifesto.
If either of the fresh legal challenges are successful then it could hamper UK Prime Minister Theresa May’s Brexit plans and increase the likelihood of a softer negotiating stance, which is seen as beneficial for the Pound.
Euro
The Pound to Euro exchange rate rallied by around a cent on Friday as better-than-anticipated UK public sector borrowing figures boosted Sterling, while the single currency was hurt by the European Central Bank’s latest stimulus drive and fears surrounding Italy’s third biggest bank.
It was reported on Friday morning that Britain’s goods deficit narrowed from -£13.8 billion to -£9.7 billion in October, which beat estimates of -£11.8 billion. Exports rose by £2.1 billion, while imports increased by £2 billion, which made it difficult to argue that Sterling’s post-Brexit depreciation has had a positive impact on UK export growth.
Demand for the Euro remained depressed due to the ECB’s recent decision to prolong QE through 2017. Confidence was also impacted by concerns that Italian bank Monte dei Paschi di Siena may require state aid, following a surge in borrowing costs in reaction to the political instability caused by former PM Matteo Renzi’s recent resignation.
US Dollar
‘Cable’ held relatively flat on Friday as stronger-than-expected UK trade data was met by robust US consumer confidence figures.
The University of Michigan’s latest sentiment index jumped from 93.8 to 98.0 in December, indicating that American consumers are feeling more confident about the economy following Donald Trump’s shock election victory. Respondents spontaneously mentioned the impact of new (Trump’s) economic policies more times than ever before in the history of the survey.
Canadian Dollar
Sterling tumbled by around a cent versus the Canadian Dollar over the weekend as oil prices jumped in reaction to news of additional production cuts. Russia and several other non-OPEC countries agreed to reduce output over the weekend and minutes later Saudi Arabia announced that it was also curbing output further – building on the OPEC deal at the end of November. The surprise Saudi cuts helped oil prices rally, which in turn bolstered the appeal of the commodity-sensitive ‘Loonie’.
Australian Dollar
The Pound to Australian Dollar exchange rate rose slightly over the weekend as hopes that Britain will remain in the single market were boosted by news of additional legal challenges to the government. UK sentiment was also helped by some stronger-than-anticipated British trade figures.
New Zealand Dollar
Sterling appreciated by just under a cent over the weekend as fresh legal Brexit challenges persuaded some traders that the Pound’s recent run of form may continue into the New Year. Some analysts claim that Sterling’s reputation as a ‘mini-Dollar’, due to Britain’s historic trade and economic ties with the US, could help drive GBP crosses higher in 2017.
Data Released
19:00 USD Monthly Budget Statement (NOV) Medium -$115.0b