Pound Higher Ahead Of Brexit Court Ruling
MarketPulse | Jan 24, 2017 12:35AM ET
The British pound has been one of the best performing currencies in a week that saw the U.S. transfer of power to Donald Trump. The dollar has lost momentum ever since Trump gave little details about his strategic decisions in a press conference on January 11. The markets have been looking for further insights into how he intends to implement the changes needed to boost growth.
The greenback was flying high after the election, on the back of comments for infrastructure spending and fiscal stimulus, but has been hurt by anti-trade rhetoric in the press conference and again in his inaugural speech.
The Trans Pacific Pact (TPP) is the first casualty of an “America first” stance after President Trump signed the executive order removing the United States from the 12 country trade deal. The fate of NAFTA uncertain with members of the new administration to meet with Mexican and Canadian officials.
The pound is higher, as the market expects greater parliamentary involvement in the Brexit process to be the result of the United Kingdom’s Supreme Court ruling. The court will give its ruling at 4:30 am EST (9:40 am GMT) on Tuesday, January 24. A win by the government could mean a hard Brexit, as it has set a timeline starting at the end of March. A defeat will open the end of U.K. membership in the European Union process to input from anti-Brexit members of parliament with a possible result of a softer or less harsh divorce.
The GBP/USD gained 1.035 percent in the last 24 hours. Cable is trading at 1.2503 and has been one of the biggest winners after the inauguration of President Trump. The dollar rally has stumbled after the initial enthusiasm about American infrastructure spending and fiscal stimulus has waned, as those topics have been pushed to the background in favor of anti-trade policies and rhetoric.
The rise of the currency has taken its toll on the stock market. The focus remains on the end of the membership of the United Kingdom in the European Union. The ruling by the Supreme Court could define where the pound goes next. The outcome surprised markets that were misinformed by polls and painted a bleak outlook for Britain.
Get The News You Want
The pound has been able to recoup some of the losses, but the reality remains that the process hasn’t started. Article 50 has not been invoked. This is at the heart of the ruling on Tuesday. If the court decides the government cannot invoke Article 50 without input from parliament a hard Brexit as evidence by Prime Minister Theresa May would be reality sending GBP lower.
The market expects a defeat for the government and a slower Brexit process with more room for negotiation that could result in a better deal than just exiting the Union. The words of Theresa May in her Brexit speech have also helped stabilize the currency as she has mentioned both houses will have to prove the final decision, whatever the outcome of the ruling is.
Market events to watch this week:
Tuesday, January 24
4:30am GBP EU Membership Court Ruling
7:30pm AUD CPI q/q
Wednesday, January 25
4:00am EUR German Ifo Business Climate
10:30am USD Crude Oil Inventories
4:45pm NZD CPI q/q
Thursday, January 26
4:30am GBP Prelim GDP q/q
8:30am USD Unemployment Claims
Friday, January 27
8:30am USD Advance GDP q/q
8:30am USD Core Durable Goods Orders m/m
Original post
/h3
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.