PM can’t trigger Article 50 without Parliament’s Vote
The global economic calendar is busy today and a string of economic releases from the Eurozone have already crossed the wires. The German Ifo business climate index declined in January. Meanwhile in Italy, industrial sales and orders increased in November.
In the UK, the Confederation of British Industry’s (CBI) total order numbers are up for release today. Market participants are likely to pay close attention to these figures as they analyse the post-Brexit referendum scenario and to determine how the UK economy is coping. In addition to this, the Bank of England (BoE) Governor, Mark Carney is scheduled to speak today. Across the Atlantic, weekly mortgage applications and housing price index are up for release.
Pound Sterling – UK Markets
The Pound has reversed its previous session losses and is trading on a stronger footing against the greenback this morning. Investors digested a ruling passed by Britain’s Supreme Court stating that a parliamentary approval is needed for triggering Article 50 of the Lisbon Treaty, which will officially kick-start UK’s 2-year divorce proceedings from the European Union. The court decision puts UK PM, Theresa May’s plans to trigger Article 50 by March end in jeopardy, as she will first seek approval from both, the House of Commons and the House of Lords. Meanwhile, the highest court also stated that consent from devolved administrations of Scotland, Wales, and Northern Ireland weren’t required to begin the official exit process.
Today, the UK economic calendar shows the release of CBI’s industrial trends survey data. Further, the BoE Governor, Mark Carney is set to speak today in Germany. Market participants then move attention to tomorrow’s major economic release i.e. UK’s gross domestic product for 4Q 2016.
US Dollar – US Markets
The US Dollar is trading lower against the Euro and the Pound this morning. Ahead in the session, market participants will keep a close watch on the US housing price index for November and weekly mortgage applications data to gauge the health of the nation’s housing sector. Going forward, investors will witness a data packed session tomorrow as preliminary reading of the US Markit services PMI and weekly jobless claims data are scheduled to cross the wires.
Yesterday, the US Dollar ended higher against most of its major peers. Flash estimates from data provider IHS Markit indicated that manufacturing activity in the world’s largest economy expanded at the fastest rate since September 2014 for January, indicating optimism for President, Donald Trump’s governance. Meanwhile, the Richmond Fed manufacturing index registered an unexpected rise in January. However, on the downside, the US home resales declined more than expected in December, with the supply of houses in the market dropping to levels last seen in 1999.
Euro – European Markets
The Euro is trading higher against the greenback this morning. Data released earlier in the session showed that the German Ifo business climate and expectations indices surprisingly dropped in January, raising doubts over the nation’s current conditions and business expectations. However, the German current assessment index advanced at par with market estimates for the same month. Meanwhile, data from Italian National Institute of Statistics indicated that the nation’s seasonally adjusted industrial orders as well as industrial sales surged in November. Elsewhere, Spanish producer price index advanced in December from the prior month. Amid a lack of data prints ahead in the day, market participants look forward to the release of German GfK consumer confidence index for February, scheduled tomorrow.
Yesterday, the Euro ended weaker against the US Dollar and the Pound, as Markit reported some mixed flash PMI figures from the Eurozone for January. While manufacturing activity unexpectedly surged, market sentiment was somewhat negated by a surprise drop in service sector activity for the same month.
Other Currencies – Highlights
The Australian Dollar is trading on a weaker footing against the US Dollar this morning, as Australia’s consumer price inflation rose less than expected in the fourth quarter of 2016, underlining the risk that interest rates in Australia are more likely to move down than up this year. Further, the nation’s core consumer inflation, a closely watched gauge by the Reserve Bank of Australia (RBA) while making policy decisions, also missed forecasts. These numbers highlight the downside risks to inflation in Australia and indicates that it will take longer to reach the 2.0-3.0% inflation target. The rise in consumer prices were attributed to higher fuel prices, domestic vacationing cost and house prices.
The RBA’s next policy decision, scheduled on the second week of February will attract a lot of market attention, as traders will be keen to know the central bank’s next policy move amid Australia’s slowing inflation. In other economic news, Australia’s Westpac leading index advanced in December from the previous month.