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British Pound Gains as Supreme Court Weighs Brexit Appeal

British Pound Gains as Supreme Court Weighs Brexit Appeal

2016-12-06 08:54:00
Ilya Spivak, Head Strategist, APAC
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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

GMT

CCY

EVENT

ACT

EXP

PREV

21:00

NZD

ANZ Truckometer Heavy (MoM) (NOV)

4.0%

-

-0.4%

22:30

AUD

ANZ Roy Morgan Weekly Consumer Conf

118.6

-

115.4

0:00

JPY

Labor Cash Earnings (YoY) (OCT)

0.1%

0.2%

0.2%

0:00

JPY

Real Cash Earnings (YoY) (OCT)

0.0%

0.2%

0.9%

0:01

GBP

BRC Sales Like-For-Like (YoY) (NOV)

0.6%

1.7%

1.7%

0:30

AUD

BoP Current Account Balance (3Q)

-A$11.4b

-A$13.5b

-A$15.9b

0:30

AUD

Net Exports of GDP (3Q)

-0.2

0.0

-0.2

3:30

AUD

RBA Cash Rate Target

1.5%

1.5%

1.5%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

EUR

German Factory Orders (MoM) (OCT)

6.3% (A)

-0.3%

Medium

7:00

EUR

German Factory Orders WDA (YoY) (OCT)

-0.2% (A)

2.9%

Medium

8:15

CHF

CPI (MoM) (NOV)

-0.3% (A)

0.1%

Medium

8:15

CHF

CPI (YoY) (NOV)

-0.3% (A)

-0.2%

Medium

8:15

CHF

CPI EU Harmonized (MoM) (NOV)

-0.2% (A)

0.1%

Low

8:15

CHF

CPI EU Harmonized (YoY) (NOV)

53.9 (A)

-0.3%

Low

8:30

EUR

Markit Germany Construction PMI (NOV)

6.3% (A)

52.9

Low

9:10

EUR

Markit Germany Retail PMI (NOV)

-

51.0

Low

9:10

EUR

Markit Eurozone Retail PMI (NOV)

-

48.6

Low

9:10

EUR

Markit France Retail PMI (NOV)

-

47.5

Low

9:10

EUR

Markit Italy Retail PMI (NOV)

-

46.5

Low

10:00

EUR

Eurozone GDP SA (QoQ) (3Q F)

0.3%

0.3%

Medium

10:00

EUR

Eurozone GDP SA (YoY) (3Q F)

1.6%

1.6%

Medium

10:00

EUR

Eurozone Gross Fix Cap (QoQ) (3Q)

0.4%

1.1%

Low

10:00

EUR

Eurozone Govt Expend (QoQ) (3Q)

0.4%

0.2%

Low

10:00

EUR

Eurozone Household Cons (QoQ) (3Q)

0.3%

0.2%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0109

1.0399

1.0581

1.0689

1.0871

1.0979

1.1269

GBP/USD

1.2468

1.2585

1.2658

1.2702

1.2775

1.2819

1.2936

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

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