Sterling
The Pound dipped versus most of the majors yesterday following the UK Supreme Court judgement. The ruling, by eight judges to three, means that the government cannot trigger Article 50 without first receiving parliamentary ratification. This was already priced into the Sterling exchange rate and subsequently was not enough to breathe new life into the Pound’s recent rallies. The specific news that sent Sterling lower was the Supreme Court’s ruling that devolved assemblies in Scotland and Northern Ireland would not be consulted. Opposition to Brexit in Scotland and political malaise in Northern Ireland were seen as possible hurdles that UK Prime Minister Theresa May will now not have to overcome.
Euro
Sterling failed to make gains against the Euro yesterday as traders locked in profit following the UK Supreme Court ruling. The Pound had rallied at the start of this week’s session in anticipation of the result and it was a natural response for investors to cash in when the announcement was made. It could have been different had devolved assemblies been given the power to have their say, but without Scottish and Northern Irish parliamentary dissent it is likely that the government will gain the votes it needs to push Brexit through parliament.
The composite of Eurozone private sector output slipped from 54.4 to 54.3 in January, it was reported yesterday, due to a surprise slowdown in the services industry. However, better-than-anticipated manufacturing figures meant that sentiment towards the single currency was largely unchanged.
US Dollar
‘Cable’ softened a little bit yesterday in the aftermath of the UK Supreme Court Brexit ruling.
Also weighing on GBP/USD was a raft of Federal Reserve rate hike bets. The latest US manufacturing PMI showed that factory output jumped from 54.3 to 55.1 in January thanks to the fastest rise in new work for over two years. The robust data, which appears to reflect President Trump’s drive to reignite America’s manufacturing belt, was music to the ears of the Fed hawks. There are currently three rate hikes projected in 2017 and we could see significant rallies in favour of the ‘Greenback’ if this proves to be the case.
Canadian Dollar
Sterling declined by around -120 pips against the Canadian Dollar yesterday, falling from a three-week high as profit taking stances drove the Pound lower. The commodity-sensitive ‘Loonie’ also appeared to gain support following news that Donald Trump had taken steps to advance the construction of the Keystone XL oil pipeline. The proposed pipeline extension would allow Canada to export more oil to the US but the project has been dogged by environmental concerns.
Australian Dollar
Sterling tumbled against the Australian Dollar following the UK Supreme Court Brexit judgement, however, GBP/AUD clawed back most of its losses by the end of the London session.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate slid slightly yesterday ahead of this evening’s New Zealand CPI report. Analysts anticipate a significant jump from 0.4% to 1.2% in the Antipodean nation’s inflation rate, which could be enough to drive the ‘Kiwi’ higher versus Sterling.
Data Released
09:00 EUR German IFO – Business Climate (JAN) Medium 111.3
16:00 GBP BOE’s Carney Speaks in Wiesbaden, Germany Medium
21:45 NZD Consumer Prices Index (YoY) (4Q) High 1.2%