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March 2017

Sterling drops as Article 50 gets green light

Published: Tuesday 14 March 2017

  • Sterling drops as Article 50 gets green light
  • Aussie Dollar weaker after mixed data - but not against Sterling
  • USD strengthens as Federal Reserve rate hike nears
By David Johnson
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The news that Parliament has approved the triggering of Article 50 caused a slump in the value of the Pound after a day in which Sterling had actually recovered a little. UK Prime Minister, Theresa May, could trigger the start of the EU exit negotiations as soon as this week, but has pledged to make the move before the end of March, in any event.
 
In Europe, while it looks like there may be a four party coalition in the Dutch elections, as we have seen in so many recent polls, they don’t really mean anything until the last vote is counted. Hence, there is nervousness around whether the anti-EU lobby could gather momentum. Voting is on Wednesday. In the meantime, German economic expectations, as measured by the ZEW institute, are expected to have risen and Eurozone industrial production likewise. The Euro may well have a bumpy ride over the next 48 hours.
 
The US Dollar is also likely to have a few rollercoaster days. The US Federal Reserve is on the verge of raising US interest rates and could do so as soon as tomorrow. The Dollar has strengthened in anticipation of that and is currently trading down at 1.21 against the Pound and 1.06 against the Euro. Before we get to that, this afternoon brings an expected improvement in US producer prices this afternoon and tomorrow brings retail sales and inflation figures. The forecasts are for higher inflation, but a dip in shopping mall activity. I doubt it will dampen the Fed’s enthusiasm for a ‘normalisation’ of interest rates though.
 
Sterling’s overnight drop also allowed the GBP-AUD exchange rate to slip and that drop of a cent or so would have been greater if Australian business confidence hadn’t fallen in the data released overnight. The drop in the index from 10 to 7 was a surprise and the Aussie Dollar weakened against everything other than the Pound. However, the Australian Dollar will have been helped to some degree by the improvement in China’s industrial production…always assuming the data is accurate – and that is forever in question.
 
And the Scottish First Minister is coming in for a lot of criticism and quite a few political put-downs over her demands for another ‘once in a lifetime’ Scottish Independence Referendum. The fact that the EU has a list of applicants ahead of Scotland, the fact that the UK Parliament has to agree to a referendum, the debate over the number of Scottish jobs that rely on UK support compared to those that rely EU support and the confused nature of an independent Scottish currency all appear to be ignored in such circumstances. Those south of the border often wonder whether Nicola Sturgeon has any other policies.
 

Joke

 
A slightly dim-witted chap is on a game show. His next question is, ‘Which of the following birds does NOT make its own nest?
a) Sparrow
b) Thrush,
c) Magpie,
d) Cuckoo?"
“That’s a tough one,” says Johnny. “I don’t know anything about birds. Can I phone a friend?”
The game show host says that he can and they set up a call to his friend Mike. Johnny reads out the question to Mike and Mike says, “Johnny, that’s so simple. Are you an idiot? It’s the Cuckoo, of course.”
“Are you certain?” says Johnny. “There’s £50,000 riding on the answer, or I’ll lose £25,000. “
“Totally sure,” says Mike.
Johnny gives that as his answer and, after a tense pause during the advert break, the host confirms that Johnny has won £50k. Confetti sprays everywhere and two hostesses lead Johnny off stage. Johnny grabs his mobile phone to call Mike and thank him.
“I won, Mike. I can’t thank you enough. How on earth did you know that Cuckoos don’t make their own nests?”
“Because,” says Mike, “They live in flipping clocks, you moron.”
 

Today's Major Economic Releases
 

Market
BST
Data/Event
Previous
Expected
EUR 10:00 EU: Industrial Production -1.6% 1.2%
EUR 10:00 EU: ZEW Economic Sentiment 17.1 19.3
USD 12:30 US: Producer Price Index 0.6% 0.1%
USD 12:30 US: Core Producer Price Index 0.4% 0.2%
GBP 13:30 UK: Conference Board Leading Index 0.0% 0.0%
NZD 21:45 New Zealand: Current Account -4.89b -2.43b

For more information, infographics and the latest currency insights, visit www.halofinancial.com/blog
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