An Interesting Twist For The Pound Yesterday
An interesting twist for the Pound yesterday, as a QC's Facebook post got traders talking about a High Court ruling over whether the government will be allowed to invoke article 50 without parliamentary approval. Following the speculation from the post that the ruling would be announced today, official confirmation came a few hours later and we're due to hear at 10am today whether the government will get their way or not.
The speculation seemed to lend itself to uncertainty that the government would get it all their own way and Sterling moved higher on the rumor that they won't. Given how short the market is when it comes to the Pound because of Brexit, any delays or legal challenges that get in the way of leaving Europe could be seen as marginally Sterling positive and give the value of the Pound a bit of a boost.
According to Standard and Poors' The Pound is now undervalued by around 15% and is set to remain so for some time. No surprises there, but the interesting point they make is the Pound's no stranger to big moves and since 1975 there have been eight major periods of decline, with an average duration of six months and an average move of 13.8% against the Dollar and 18% against the Euro. CNBC has the in depth take.
We'll stay with Sterling for now, because today's the day where the Bank of England will (probably) sit on their hands. Mark Carney is still confident of another rate cut before year end, but with the data looking so good and inflation expectations so high, he'd be hard pressed to justify his actions. The Bank's inflation report is released this morning and it will be interesting to see if their expectations for inflation next year are as high as the NIESR's prediction of 4%. A forecast in the higher ranges might give Sterling a lift as traders unwind their expectations of future rate cuts.
In the US, the Fed left rates on hold, unsurprisingly, but the case for a hike continues to strengthen, so we'll see what next week brings and whether the rate setting committee will remain on course or be blown horribly adrift by a Trump victory.
Hillary is coming under more fire, this time as Fox News reports that the FBI's investigation into the Clinton Foundation is more far reaching than is being reported and concerns 'pay for play' practices between the foundation and Mrs. Clinton in her capacity as Secretary of State. This is Fox News, so we take everything they say with more than a pinch of salt, but it is the number two news channel in the US, so is bound to have an impact.
There's very little else of note for the time being, so we'll see what today brings and then hope that we have something more interesting to talk about tomorrow! Data wise, it's all about the Bank of England and that inflation forecast (riveting), but also UK service sector numbers will be closely watched as it's the largest part of our economy. The US session brings plenty of tier one data, but is still going to play second fiddle to the election.
Away from the markets, George Osborne handed Theresa May the 'Politician of the year' award at the Spectator Awards last night, which must have been fairly galling given that she sacked him on day one in her job, but apparently it was as well humored as a political bash can be, according to the FT.
Have a great day
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