EU court ruling triggers no-Brexit speculation6th December 2018
The European Court of Justice Advocate General ruling that the UK could revoke Article 50 increased speculation that the UK would be able to avoid a ‘no-deal’ Brexit and boosted Sterling, as volatility increased again. The construction PMI data strengthened to a four-month high of 53.4 in November, beating consensus forecasts and employment strengthened at the fastest pace since December 2015. There was a very limited reaction as the Euro was supported in the 1.1235 area and Sterling failed to hold above 1.2800 on the Dollar.
Parliament ruled that the government was in contempt of Parliament for not releasing full legal guidance, triggering fresh Sterling selling and the Dollar moved back below 1.2700. Political uncertainty dominated with intense Parliamentary debate, further uncertainty over the implications of a Brexit deal defeat next week, with parliament seeking gain greater control. Weaker global risk appetite also hampered Sterling.
The Dollar index, tracking the Greenback against a basket of its major currency rivals, found support yesterday based majorly on Federal Reserve (Fed) speak.
US data releases were sparse with the IBD consumer confidence reading declining to 52.6 for December from 56.4 previously and the lowest reading since April, maintaining an element of uncertainty surrounding potential growth trends.
New York Fed President Williams stated that the US economy is strong and that he continues to expect further gradual increases in interest rates. He also stated that the Fed dot plot forecasts will continue, although it would be appropriate to take a further step back from forwarding guidance, which increased underlying uncertainty. The relatively hawkish tone on interest rates was significant in underpinning the US Dollar against European currencies.
The Euro moved above 1.1400 against the Dollar as doubts surrounding the US growth outlook and lower bond yields dominated sentiment. Eurozone Producer Prices beat consensus forecasts but the data made little impact on the currency. Weak Eurozone data releases and political pressures in both Italy and France have led to speculation of a weaker outlook for the Euro in 2019. Macron needs popular support to reform the French economy and extend his programme of increasing integration across the EU and Italy have still not resolved their budgetary issues.
Data to watch:
00:30 AUD Gross Domestic Product (QoQ) (Q3)
00:30 AUD Gross Domestic Product (YoY) (Q3)
01:45 CNY Caixin Services PMI (Nov)
08:00 EUR Non-monetary policy’s ECB meeting
08:15 EUR Markit Services PMI (Nov) (Spain)
08:30 EUR ECB President Draghi’s Speech
08:55 EUR Markit Services PMI (Nov) (Germany)
08:55 EUR Markit PMI Composite (Nov) (Germany)
09:00 EUR Markit Services PMI (Nov)
09:00 EUR Markit PMI Composite (Nov)
09:30 GBP Markit Services PMI (Nov)
13:15 USD Fed’s Quarles speech
15:00 CAD BoC Rate Statement
15:00 CAD BoC Interest Rate Decision
19:00 USD Fed’s Beige Book
23:50 JPY Foreign investment in Japan stocks (Nov 30)
23:50 JPY Foreign bond investment (Nov 30)
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