FX Markets Hone in on UK Supreme Court Results, UK & US GDP
- Focus will remain on the United Kingdom as the results of the Supreme Court Brexit hearings are due.
- Inflation readings from New Zealand and Japan stand out mid-week.
- Elsewhere, we have the first GDP readings of Q4’16 from the US and the UK.
01/24 Tuesday | 09:30 GMT | GBP UK Supreme Court Rules on Brexit Hearing
The Supreme Court will deliver judgement on the application of Miller and Dos Santos vs. the Secretary of State for exiting the European Union at 09:30 GMT. If, as expected, the Justice’s rule against the government and state that they must get the approval of MPs and peers before triggering article 50, a bill is likely to be prioritized through Parliament to comply with the Court’s ruling; UK PM Theresa May has previously stated that she wants to begin talks exiting the European Union by the end of March. Last week, PM May gave a speech outlining the government’s approach to Brexit, with strong indications that the government was aware of the court’s impending decision. This could be a ‘buy the rumor, sell the news’ type of event for the Sterling.
01/25 Wednesday | 21:45 GMT | NZD Consumer Prices Index (4Q)
Like many other countries around the world, New Zealand is expected to show a bump higher in year-end inflation figures, thanks in large part due to the base effect provided by lower oil prices at this time last year. As a result, we’re looking for the Q4’16 New Zealand CPI figure to come in at +1.2% (y/y), which would be the first time that CPI ended within the RBNZ’s band in two years. With that said, however, the jump in inflation in New Zealand wouldn’t necessarily constitute a material improvement, as the Reserve Bank of New Zealand typically sees energy-borne jumps in price pressures as “temporary.” The headline reading might jazz up the New Zealand Dollar temporarily, but a sustained move is not eyed.
01/26 Thursday | 09:30 GMT | GBP Gross Domestic Product (4Q)
This is the first look at a full quarter of GDP growth since the UK decided to leave the European Union on June 23 2016 and is expected to show the economy grew by 0.5% on the quarter and 2.0% on the year, although a slightly better reading cannot be ignored. If confirmed this would show that the UK economy grew at a better rate post-Brexit. The IMF recently upgraded its forecasts for UK economic growth in 2017 from +1.1% to +1.5%, highlighting the UK’s better than expected performance in the second-half of 2016.
01/26 Thursday | 23:30 GMT | JPY National Consumer Price Index (DEC)
Policymakers in Japan continue to struggle with the effect of disinflation, as incoming price data aren’t expected to show any signs of improvement. The December National CPI reading is due at +0.2% from +0.5% (y/y), highlighting the frustrating lack of results years of extraordinary loose monetary policy and stimulative fiscal policy. If anything, further signs of inflation falling back could draw the ire of policymakers once more, who will then make the rounds about ways to combat the trend. A beat on the headline is implicitly bullish JPY, while a miss could help some of the JPY-crosses regain some lost ground.
01/27 Friday | 13:03 GMT | USD Gross Domestic Product (4Q A)
With the US Dollar surging forward in the final two months of the year, annualized US GDP in Q4’16 is expected to fall from the prior quarter’s estimate of +3.5% to +2.2%, in part due to trade balance adjustments. However, the consensus estimate provided by Bloomberg News may be discounted; the Atlanta Fed GDPNow forecast sees last quarter’s growth at +2.8%. Regardless, either outcome would point to a slowed pace of growth in the world’s largest economy, further highlighting the need for expansive fiscal reform. See has how the US Dollar’s strength since November was built on the prospect of future policy changes – not so much that data was coming in better than expected – there may be less of an impact here than usual.
--- Written by Christopher Vecchio, Senior Currency Strategist, Nick Cawley, Analyst
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