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British Pound Gains as Supreme Court Weighs Brexit Appeal

British Pound Gains as Supreme Court Weighs Brexit Appeal

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound gains as UK Supreme Court weighs Brexit appeal
  • Aussie Dollar ignores status-quo RBA, falls on net exports data
  • Euro likely to ignore revised 3Q GDP data as ECB looms ahead

The British Pound edged higher overnight in a move that may reflect building hope for a “soft” Brexit, meaning a UK break from the EU that retains the departing country’s access to the single market. Investors are waiting for a Supreme Court ruling on whether the government needs Parliament’s say-so before formally triggering an exit from the regional bloc.

Reports making the rounds on the wires suggested the administration’s lawyer was battered by the court’s 11 judges in the first day’s hearing. Meanwhile, a faction within Prime Minister May’s own Conservative party appeared to back rival Labour’s plan to force the administration to reveal its Brexit strategy before activating Article 50 of the Lisbon Treaty, which starts a 2-year countdown toward a rupture.

The Australian Dollar underperformed after data unexpectedly showed that net exports shaved 0.2% from GDP in the third quarter. The currency declined alongside front-end bond yields, suggesting the outcome stoked a dovish shift in monetary policy bets. A status-quo RBA rate decision passed almost entirely unnoticed.

Sellers will look for further evidence to support the case for easing in tomorrow’s release of the full third-quarter GDP report. The data is projected to show that the economy added just 0.2 percent in the three months through September. The year-on-year trend growth rate is seen falling to 2.5 percent. Taken together, this amounts to the weakest performance since mid-2015.

Looking ahead, the final revision of third-quarter Eurozone GDP figures is unlikely to inspire a strong reaction from the Euro as traders wait for the ECB rate decision due later in the week. The announcement is expected to deliver significant changes to the central bank’s stimulus effort. Extending QE and broadening the scope of eligible assets may emerge. Some traders also still seem to entertain a “tapering” scenario.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:00NZDANZ Truckometer Heavy (MoM) (NOV)4.0%--0.4%
22:30AUDANZ Roy Morgan Weekly Consumer Conf 118.6-115.4
0:00JPYLabor Cash Earnings (YoY) (OCT)0.1%0.2%0.2%
0:00JPYReal Cash Earnings (YoY) (OCT)0.0%0.2%0.9%
0:01GBPBRC Sales Like-For-Like (YoY) (NOV)0.6%1.7%1.7%
0:30AUDBoP Current Account Balance (3Q)-A$11.4b-A$13.5b-A$15.9b
0:30AUDNet Exports of GDP (3Q)-0.20.0-0.2
3:30AUDRBA Cash Rate Target 1.5%1.5%1.5%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
7:00EURGerman Factory Orders (MoM) (OCT)6.3% (A)-0.3%Medium
7:00EURGerman Factory Orders WDA (YoY) (OCT)-0.2% (A)2.9%Medium
8:15CHFCPI (MoM) (NOV)-0.3% (A)0.1%Medium
8:15CHFCPI (YoY) (NOV)-0.3% (A)-0.2%Medium
8:15CHFCPI EU Harmonized (MoM) (NOV)-0.2% (A)0.1%Low
8:15CHFCPI EU Harmonized (YoY) (NOV)53.9 (A)-0.3%Low
8:30EURMarkit Germany Construction PMI (NOV)6.3% (A)52.9Low
9:10EURMarkit Germany Retail PMI (NOV)-51.0Low
9:10EURMarkit Eurozone Retail PMI (NOV)-48.6Low
9:10EURMarkit France Retail PMI (NOV)-47.5Low
9:10EURMarkit Italy Retail PMI (NOV)-46.5Low
10:00EUREurozone GDP SA (QoQ) (3Q F)0.3%0.3%Medium
10:00EUREurozone GDP SA (YoY) (3Q F)1.6%1.6%Medium
10:00EUREurozone Gross Fix Cap (QoQ) (3Q)0.4%1.1%Low
10:00EUREurozone Govt Expend (QoQ) (3Q)0.4%0.2%Low
10:00EUREurozone Household Cons (QoQ) (3Q)0.3%0.2%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.01091.03991.05811.06891.08711.09791.1269
GBP/USD1.24681.25851.26581.27021.27751.28191.2936

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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