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January 2017

Sterling slowly recovering on Supreme Court ruling

Published: Tuesday 24 January 2017

  • Sterling slowly recovering on Supreme Court ruling
  • America’s exit from Trans-Pacific Partnership may benefit Canada
  • China may want in to Trans-Pacific Partnership

Monday passed with little movement in any currency. In contrast, the Pound has seen downs, then ups today. Sterling continued its meagre recovery initially, but stalled this morning ahead of the Supreme Court ruling on whether the Prime Minister can trigger Brexit negotiations or whether the UK parliament and perhaps even the regional assemblies need to be consulted. Sterling then strengthened across the board on the removal of uncertainty as the Supreme Court ruled that Article 50 cannot be triggered without a parliamentary vote and that there was no vote required from the devolved assemblies. If this morning’s UK government borrowing data is in any way improved, that will add to the warm fuzzy feeling traders have when they see the GBP acronym.
There is an Italian constitutional matter to be decided today as well. Italy’s constitutional court will rule on the structure and control of Italy’s second legislative chamber and that may force early elections in Italy. However that turns out, the Euro is unlikely to react in any significant way. We will see EU Purchasing Managers Indices today though and these are forecast to be a tad better than in December. That will improve the markets’ attitude to the euro. So Euro buyers might prefer to protect against any adverse movements.
US data today is light, but does include a Manufacturing Index and, while the forecasts are for an unchanged index reading of 54.3, the Trumpification of America might have an impact.
And speaking of the new US President, Trump’s decision to cancel America’s involvement in the Trans-Pacific Partnership (TPP) appears not to have fazed the Australasians. Australia and New Zealand have vowed to carry on with the proposed free trade area with the 11 remaining members and China has mooted plans to step in where America stepped out. So an agreement between Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru, plus maybe China, is likely to still go ahead. With the US also questioning the North American Free Trade Agreement (NAFTA), Canada may well see the TPP as a lifeline for its exports.
The market effect has been to allow the GBP-AUD rate to rise to levels we saw a fortnight ago and the GBP-NZD rate likewise. The GBP-CAD rate is up to levels last seen in December.
Other than this, it is likely to be a quiet day. When I say quiet, I don’t mean we won’t be bombarded with opinion regarding the triggering of Article 50. Some of it might even be informed.
And when I read the story of a US truck driver who lost his load on the I465 at the weekend, only one phrase sprang to mind. The truck was carrying 38,000 of marbles which were strewn across the hard shoulder and central reservation. As someone old enough to have played marbles back in the day, I just kept thinking ‘Keepsies’. If that doesn’t make sense to you young’uns, ask your dad. He’ll know.

Kindly lady Peanuts

A coach driver is taking a group of pensioners on a day trip to Brighton. He was tapped on his shoulder by a little old lady who offered him a handful of peanuts, which he happily took and ate. 
After about 20 minutes, she tapped him on his shoulder again and she handed him another handful of peanuts.  The old dear repeated this generous gesture several more times. 
When she is about to hand him another batch he says, “You are very kind but I’m full up. Why don’t you and your friends have them?”
“We can't chew them because they get stuck in our false teeth.” she said.  
The driver asked, “Then why on earth do you buy them?”
“Oh, we just love sucking the chocolate off of the outside.” 

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Flash Manufacturing Purchasing Managers' Index 54.9 54.8
EUR 09:00 EU: Flash Services Purchasing Managers' Index 53.7 53.9
GBP 09:30 UK: EU Membership Court Ruling    
GBP 09:30 UK: Public Sector Net Borrowing 12.2b 6.7b
USD 14:45 US: Flash Manufacturing Purchasing Managers' Index 54.3 54.6
USD 15:00 US: Existing Home Sales 5.61m 5.54m
Daily Currency Analysis by David Johnson
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