Brexit countdown gets a legal twist

A High Court ruling has confirmed that only the parliament and not the government has the power to trigger Article 50.

A High Court ruling has confirmed that only the parliament and not the government has the power to trigger Article 50.

Therefore a parliamentary vote will be required before Article 50 is activated. The UK government will appeal the verdict and it will now go to the Supreme Court in December for review.

If upheld in December, this would lean towards of softer Brexit as the majority of parliament have a pro-EU stance. The second impact is that it will very likely delay the triggering of Article 50 due to the negotiations within parliament on agreeing the right deal.

The pound has benefitted from the news as from a financial markets perspective a softer Brexit is favoured. We can expect further short term volatility in the pound as we get further news and twists.

Interest rates left unchanged

Yesterday the Bank of England left interest rates unchanged and shifted their bias from easing to neutral which again mildly favoured Sterling. The BoE will adopt a “wait and see” approach and only if economic data markedly dips, will we see a further rate cut. It is also very unlikely that we will see any movement towards a rate hike despite higher inflation given the ongoing Brexit uncertainties.

ECB monetary policy left unchanged

Sterling is higher this morning against the euro, after the European Central Bank’s (ECB) meeting at lunchtime yesterday failed to deliver any significant change.

Sterling is higher this morning against the euro, after the European Central Bank’s (ECB) meeting at lunchtime yesterday failed to deliver any significant change.
The ECB left monetary policy unchanged, as expected, with the refinancing rate remaining at 0.00% and the deposit rate at -0.4%. The euro briefly spiked higher after Mario Draghi said that there was no discussion, either on tapering the QE programme or extending it beyond the original deadline of March 2017.

Whilst sterling finished strongly on the euro, it wasn’t reciprocated on the US dollar, as strong US housing data released had the greenback soaring late in the session.

Portugal’s government bond yields at six week interst rates low

This morning, Portugal’s government bond yields are hovering near six week lows, ahead of a key review by Canadian ratings firm DBRS, out after the close of play today. Whilst this is slightly concerning for Portugal, they are expected to get through the test unscathed. If it were to be downgraded, it would fall out of the ECB’s QE programme.

Wise Money news to come

Today is fairly thin in terms of wise money news data, however we do have UK public finance figures out this morning. Whilst expected in lower than last month’s number, a lower figure shouldn’t dampen Sterling’s resurgence on the euro too much. Aside from this, most of the day will be spent interpreting the ECB press conference from yesterday, with many investors keenly watching Sterling/euro advances.

Brexit good news- Boris Johnson believes in good deal to access the single market

Foreign Secretary Boris Johnson believes that Brexit will be a good deal to access the single market. Foreign Secretary Boris Johnson believes that Brexit will be a good deal to access the single market.

After a steady flow of positive data in the UK, Foreign Secretary Boris Johnson, suggested anti-Brexit campaigners have got it wrong.

Standing in front of a select Foreign Affairs committee, he said that the EU would be wrong to ‘punish’ the UK for leaving, also commenting that Brits will still drink champagne and be the biggest importer of German cars than any other.

It’s his belief that the UK will get a good deal regarding access to the single market, whilst gaining freer access to the global market.

There’s good news for rent payers, as the rate of rent increase grew at its slowest pace in September this year, thanks to the decision of landlords to absorb the growing tax rates rather than pass them onto already high-paying renters.

With a tax reduction in buy to let properties expected in April 2017, landlords seem to have decided to let the slight increase slide, keeping tenants happier as new contracts currently average just over £900 per month. In London, the cost actually fell 0.8% which will no doubt be good news for those looking to move in the city.

Janet Yellen rounds up the week at Boston conference

After a thin day of data yesterday and slight GBP fightback, today’s US Advanced Retail Sales & the University of Michigan Confidence report are the key pieces of data available, whilst Janet Yellen finalises the weeks trading with a conference in Boston.

Philip Hammond set positive economic tone

New UK Chancellor Philip Hammond took to the Conservative stage, and set a positive tone for the conference.

New UK Chancellor Philip Hammond took to the Conservative stage, and set a positive tone for the conference.

He stated that roads and railways, among other infrastructure, has been seriously under invested, and that the UK is considerably behind other dominant countries. Hammond has been assigned the task of announcing the Autumn Statement, and investors will want his positive sentiment to be more concrete on November 23.

Much needed positive wise money data for UK

With regards to data, the UK enjoyed some much needed positive news, with Manufacturing PMI rising to 55.4 in September against 53.4 in August. Exports have been enjoying a tremendous amount of added work, as the pound continues to be hit hard by most trading currencies.

That said, importers are starting to take financial hits across the board. Buying foreign currency is proving expensive for import businesses, and Teresa May’s announcement that Article 50 will be triggered Q1 2017 has found financial directors wincing that much more.

European bank job cuts

European bank job cuts have made the front pages this morning, as a number of banks are suggesting seats may be left empty in the coming years. Dutch, German and Spanish banks have all stated in recent days that a staff cut is only natural due to current market conditions, as well as some looking at a new digital age, stating a non-requirement for human resource.

UK stock exchange highs

The FTSE 100 has cleared its year high as sterling fell off a cliff in early trading, after May announced an Article 50 date, and outlined her hard stance on key issues. Today has already seen the Reserve Bank of Australia keep interest rates at 1.5%, with New Zealand sharing its Dairy Auction averages with onlookers. In the European and US markets, we have very little to mull over, with UK Construction PMI the only dish to pick.

FED keeps loans interests rate unchanged

There was no surprise from this week’s FED meeting, as Janet Yellen announced there would be no loans interest rate hike in September.

There was no surprise from this week's FED meeting, as Janet Yellen announced there would be no loans interest rate hike in September.

The interest rate has not moved since last December’s decision to move interest rates from 0.25% to 0.5%. Another rate hike in December 2016 is now looking a shoe in.

It seems that unless global economic sentiment deteriorates in the next few months, December is seen as a good time to move again. As key data solidified in recent months, the Fed now want to see ‘economic progress’. Employment and inflation will be scrutinised until the end of the year, and the Fed members seem more aggressive as three voted to move rates, where as in July there was just the one.

UK’s public sector net borrowing falls

The UK’s Public Sector Net Borrowing fell in August, as the latest figures from the Office for National Statistics were released. The Public borrowing figure has dropped to £10.5 billion from July, down £0.9 billion from a year earlier, but the numbers had been expected to fall an additional £500 million. UK Borrowing in the present economic year to date has touched £33.8 billion, which is £4.9 billion lower than the previous year.

The ONS did say that ‘there was no clear sign of Brexit voting affecting the figures’. They also added that ‘receipts from income and corporation taxes rose strongly compared with a year ago, but VAT receipts rose at their slowest annual pace since March 2015′.

Also out was positive car production news in the UK, as car production touched a 14 year high in August. According to the Society of Motor Manufacturers and Traders (SMMT), just over 109 K vehicles were released from manufacturers hands, up 9.1% year on year.

Attention shifts to Sterling

Following a bit of an anti-climax after no policy changes from the FED on Wednesday we only saw a narrow trading range of about 100 points on the GBPUSD pairing yesterday. We surprisingly saw an even narrower trading range on GBPEUR yesterday considering we had the President of the ECB, Mario Draghi speaking at 2 pm. Further to this, he gave a speech at the first annual conference of the ESRB (European Systemic Risk Board) where he discussed overbanking in Europe and macro-prudential policy. We didn’t see too much market movement during this speech as it was mainly focussing on the broader picture of the over European banking system.

Attention focuses on Eurozone and US PMI

With not much news to drive the market today, the attention will be focussed on Eurozone and US PMI. So far, both have shown resilience in the face of the UK’s vote to leave the EU although analysts will be watching for hints of pre-election nerves within the US economy.

Pound up after bank holiday weekend

After the 3 day weekend, the markets have opened up after fully digesting the Fed Jackson Hole meeting with the Pound increasing over the bank holiday weekend.

After the 3 day weekend, the markets have opened up after fully digesting the Fed Jackson Hole meeting with the Pound increasing over the bank holiday weekend.

Janet Yellen’s suggestion that a rate rise is still likely has seen the FTSE strengthen again by 0.3%, but oil has stated to come under renewed pressure.

With a hike now potentially in September a real possibility, Brent Crude found itself trading below $50 per barrel once more and with that, the price for those who do not hold US Dollars as their base currency will find all oil based products more expensive to purchase.

Number of investments coming into UK at year high

The number of investments that come into the UK was at a year high, up a big 11%.

A number of the 116,000 jobs created were said to have been created from overseas investments, also showing the UK as the most appealing region in Europe to do business.

A number of reasons were given as to why the UK attracts so well, such as the English language (spoken globally), fair tax and EU membership, which could now become a hindering block after Article 50 is triggered.

Today’s key data is mixed in terms of geography, with UK Mortgage Approvals, Fed’s Fischer speaking on Bloomberg and German Consumer Price Index out today which may move the markets.

US Dollar surges after non farm payroll boost

The US Dollar received a boost in trading, as did stock markets after the non farm payroll report was released.

The US Dollar received a boost in trading, as did stock markets after the non farm payroll report was released.

With job numbers in the US soaring by 287,000, way above the 170,000 expected number; investors flocked to the US dollar to find stable ground, as uncertainty lingers in the Eurozone after the Brexit vote in the UK.

However, gains were slightly capped for the Greenback, as average weekly earnings are still muted, though markets still seem to be moving towards a risk off scenario.

Despite the strong labour report, talks of an interest rate hike seem to be off the table for the near future from the Federal Reserve, as we move back into market consolidation mode.

As far as economic data goes, the US starts us off with the Conference Board Employment Trends Index and the Federal Labour Market Conditions Index, coupled with a speech by FOMC member George.

Concerns over Italian banks mount

Meanwhile in the eurozone, concerns over Italian banks continue to mount, though analysts still insist that internal stress tests for the banks reveal they are resilient and do not need any bailout funds. Euro area finance ministers are due to meet in Brussels today on a fairly quiet start to the week on the economic calendar.

Sterling subdued

Sterling remains subdued and under pressure after the Brexit vote; as markets are likely to remain in limbo until we have a leader of the Conservative Party to carry out the trigger to Article 50. The pound has slid down further after Friday’s positive US data, and currently GBP/USD is trading well below the 1.30 level.

Most of the focus for the UK currency markets will be on tomorrow’s speech by Bank of England Governor Mark Carney on financial stability and the inflation report hearings to provide further direction. The BRC Retail Sales Monitor is due for release today and will provide interim direction for the pound.

Hawkish FED triggers repricing of interest rates

FED minutes released yesterday sparked a considerable move in the currency market, as the hawkish Fed triggered a sudden, and sharp, repricing of interest rates.

FED minutes released yesterday sparked a considerable move in the currency market, as the hawkish Fed triggered a sudden, and sharp, repricing of interest rates

The minutes demonstrated a committee determined to continue in their tight monetary policy, with most Fed officials signalling a June hike likely, if the economy warrants it.

The Fed’s Federal Open Market Committee (FOMC) judged that “…if incoming data were consistent with economic growth picking up in the second quarter, labour market conditions continuing to strengthen and inflation making progress towards the FOMC’s two per cent objective then it likely would be appropriate”.

It will be interesting to monitor if the Fed will be able to follow through with their plan, especially as the next rate meeting is scheduled ahead of the UK’s EU referendum, an outcome of which is still in balance.

Remain vote tops opinion poll

There was major focus on Sterling, as it rose sharply both against the euro and the US dollar, after an opinion poll released by Ipsos MORI for the Evening Standard revealed a large lead for the remain camp.

Ipsos MORI reported that 55% of the public are planning to vote to stay in Europe in June’s referendum, with just 37% backing Brexit. In Europe, the main focus yesterday was Eurozone inflation figures, which remained unchanged in April and with the YoY rate of consumer price index growth falling -0.2%.

Data to come

Looking at today’s calendar, this morning the market will receive Q1 employment figures from France, but the real focus for the euro will be the last European Central Bank minutes meeting.

Over to the UK, and April retail sales data is scheduled for release, with the market expecting sales to rebound. In the afternoon, as the North American market opens, the Philly Fed’s manufacturing survey will be closely watched, especially considering the weakness in the NY Fed survey earlier this week.

Initial jobless claims numbers are also scheduled for release, and the market will also have the opportunity to find out more about the Fed plans, with Vice-President Fischer and Dudley both scheduled for comments today.

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