British Pound Gains as Supreme Court Weighs Brexit Appeal

2016-12-06 08:54:00

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.

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