Theresa May’s Brexit plan will be put to the test as the Supreme Court has ruled that the government cannot trigger the Brexit process without Parliamentary approval. Market participants view the Parliamentary involvement in the process as reducing the risk of a more disorderly Brexit. On the data front, UK’s public sector deficit narrowed in December.

Meanwhile in the Eurozone, private sector growth slightly dipped in January. Later today, flash manufacturing purchasing managers’ index (PMI) and existing home sales data from the US might provide some short-term trading impetus.

Pound Sterling – UK Markets

Earlier today, Sterling was trading on a firmer footing against the greenback. But as of now, the Pound has stalled its recovery rally and is trading weaker against its US counterpart. The UK’s Supreme Court has ruled that the government cannot initiate the Brexit process without consulting the Parliament. The UK government had appealed against a High Court ruling in December that Parliament must approve the Article 50 process of leaving the European Union. On the data front, UK’s public sector deficit narrowed in December.

Yesterday, Sterling hit a 6-week peak against the greenback, on speculation that Britain's Supreme Court would rule that the government needs Parliamentary approval to trigger formal Brexit talks. On the macroeconomic front, the Confederation of British Industry will publish results from its January survey tomorrow. Moving ahead, market participants would focus on UK’s BBA mortgage approvals and nationwide housing prices data along with preliminary fourth quarter GDP data, scheduled to release later this week.

US Dollar – US Markets

The US Dollar has managed a small recovery against its peers this morning and snapped its 4-day losing streak against Sterling and the shared currency. For further cues, preliminary print of the US Markit manufacturing PMI for January will be eyed and is anticipated to register a slight increase. In addition to this, the US Richmond Fed manufacturing index for January and existing home sales data for December will be in focus. Existing home sales in the US is estimated to decline during the month.

Yesterday, the US President, Donald Trump, formally withdrew from the 12-nation Trans-Pacific Partnership trade deal and addressed US manufacturing executives stating that he’d impose border tax on firms that import products into the nation after moving their factories overseas. Following this, the greenback ended weaker across the board, on growing concerns that the international trade regime will see sharp changes under the new President. Also, the US Treasury Secretary pick, Steven Mnuchin stated that a strong US Dollar could hurt the nation’s economy, thus exerting additional pressure on the greenback.

Euro – European Markets

The shared currency has pulled back against the greenback this morning. Data released earlier during the session showed that the Eurozone kick-started 2017 on a healthy note, as the region’s composite PMI registered only a slight fall for January, remaining comfortably above the 50-point benchmark that indicates growth. Manufacturing activity in both the Eurozone and Germany remained buoyant during the same month. In fact, German manufacturing PMI notched a 36-month high level. In other news, French private sector activity rose to a 67-month high level.

Yesterday, the Bundesbank in its monthly report stated that German inflation could reach 2.0% in January, amid higher energy prices, hitting the ECB’s elusive target for the first time in four years. On the data front, the Eurozone’s consumer confidence index advanced to an almost 2-year high in January. However, the reading was slightly less than market consensus. Helped by these upbeat releases, the Euro ended higher against its American peer, extending gains for the fourth consecutive session.

Other Currencies – Highlights

The Japanese Yen is trading in negative territory against the greenback this morning, dropping for the first time in four sessions. Data released earlier in the session showed that Japan’s manufacturing activity expanded at its fastest pace in almost three years in January, amid a jump in export orders, indicating that overseas demand is not as weak as some economists had feared. There was a robust expansion in both output and new orders. Looking ahead, market participants would focus on Japan’s trade balance, consumer price index and unemployment rate data this week.

During the previous session, the Japanese Yen ended higher against its US counterpart, as the greenback declined across the board, pressured by concerns about the impact of the US President, Donald Trump's protectionist trade stance. On the domestic data front, Japan’s all industry activity index advanced less than expected in November. Moreover, final reading of Japan’s leading economic index rose to a 15-month high level and the coincident index also registered a rise in November, compared to the prior month.