Sterling
The Pound ticked higher versus the majors yesterday as investors bet the Supreme Court ruling, due this morning, would ensure that parliament votes before the government triggers Article 50 of the Lisbon Treaty.
Sterling stands to make further gains if the judges rule that devolved assemblies in Scotland and Northern Ireland will also be included in the vote. Scotland voted strongly in favour of remaining in the EU and a recent political breakdown in Northern Ireland means that Belfast’s involvement could delay UK PM Theresa May’s March schedule – both of these factors would be expected to give the Pound a boost.
However, any upward Sterling momentum from a ruling that involves Scottish and Northern Irish parliaments voting on Brexit could easily be reversed fairly swiftly as it seems most unlikely that British MPs will actually vote down the referendum result.
Euro
Sterling rallied by around 70 pips to strike a fortnightly high against the Euro yesterday as investors backed the Supreme Court to rule against the government’s claim that it should be allowed to trigger Article 50 without parliamentary consent.
If the ruling does in fact put the power of Brexit in parliaments’ hands then the Pound could strengthen further against the single currency. However, last week GBP/EUR slid on rumours ahead of Theresa May’s Brexit speech and then rallied when the news was released – and this ‘buy the rumour, sell the fact’ story could potentially play out again tomorrow.
US Dollar
‘Cable’ surged by over 150 pips yesterday allowing Sterling to reach a five-week high against the US Dollar.
GBP/USD battled through technical resistance as traders sold the ‘Greenback’ in reaction to President Donald Trump’s lack of economic policy clarity. The spending plans proposed during Trump’s Presidential campaign are likely to boost US wages and inflation, which in turn could prompt the Federal Reserve to raise rates faster-than-expected, thus bumping the US Dollar higher. However, the President has not yet revealed these plans in any great detail and has instead struck a defiant anti-establishment tone, which has not pleased markets.
Canadian Dollar
Sterling appreciated by around a cent versus the Canadian Dollar yesterday to hit a three-week high. GBP/CAD is now around eight cents stronger than it was at the beginning of last week’s session before UK PM Theresa May stated that parliament would get to vote on the UK’s eventual new EU trade package.
The Pound’s move higher coincided with a marked increase in British economic sentiment and a dovish policy message from Bank of Canada Governor Stephen Poloz.
Australian Dollar
GBP/AUD rallied by over a cent-and-a-half yesterday as UK sentiment improved ahead of the Supreme Court Brexit hearing and global risk appetite was dealt a blow by US President Donald Trump’s decision to pull out of the Pacific trade agreement. Trump’s protectionist policies carry the potential to depress demand for the risk-sensitive ‘Aussie’ over the next few years if trade tariffs that could hamper the Antipodean nation’s lucrative mining sector are imposed.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate drifted higher by around a cent yesterday to hit a 10-day high as risk aversion trends weighed on the ‘Kiwi’ and Supreme Court ruling bets supported Sterling.
Data Released
09:00 EUR Markit Eurozone Manufacturing PMI (JAN P) Medium 54.8
09:30 GBP UK Supreme Court Rules on Parliament’s Role in Brexit High
14:45 USD Markit US Manufacturing PMI (JAN P) Medium 54.5