GBP: Political sideshow offering little support to sterling
This morning at 08:00 GMT we have the European Court of Justice ruling on whether the UK could unilaterally revoke article 50. When news broke last week about the concept of cancelling Brexit without the support of other EU countries, GBP popped higher.
Theresa May and Number 10 have insisted that the vote will go ahead tomorrow, which was aimed at the weekend rumours of a delay in the Commons vote.
The market is almost wholly convinced the vote tomorrow will be lost, but it’s the size of the defeat that will impact GBP the most. Downing Street believes that the Irish border backstop is preventing Conservative support of the current Brexit deal. Therefore an initial defeat, followed by a renegotiation phase would be the most likely outcome. Boris Johnson made it clear that politicians could unify the UK’s re-negotiating position by voting down the backstop.
If the deal is rejected, there will be 21 days to set out a new plan of action. From there we could have: No deal, a second vote, renegotiate, general election, referendum, a vote of no confidence.
GBP will be incredibly twitchy over the next 48hours and beyond, and I don’t expect there to be much logic in the short-term direction.
UK GDP for October is due out at 09:30 GMT with 0.1% growth forecast.
UK manufacturing and industrial production is also due out at 09:30 GMT. Results will be overshadowed by the current political mood.
EUR: New CDU leader
Annegret Kramp-Karrenbauer has been appointed the new CDU party leader. For continuity, it’s a good result and will likely encourage Merkel to stay on as Chancellor until 2021.
USD: Jobs data recap
Headline jobs and wage growth were revised down on Friday after results fell short of the market consensus. Traders weren’t overly phased by this as there is still more than enough “depth” to the US labour market to encourage the FED to edge closer to their neutral rate of 3.0% in 2019.
Have a great day.