Good morning,

GBP: Political sideshow offering little support to sterling

The UK media does love a good resignation, even if this one isn’t directly a fall-out from the Commons debate. The European Court of Justice ruled that the UK has the right to now unilaterally revoke Article 50, as long as they have parliamentary backing.

During the Commons session yesterday, Theresa May lost three votes, which would give the House of Commons greater power if her deal fails on 11th December. Interestingly, whilst this shows on one hand that she still lacks Conservative support, on the other hand, it could play in her favour as there is currently no clear bias towards a “no deal”. Therefore any changes made by the House of Commons would likely be in the softer direction, which historically has created a bullish Pound. This could force a cheque mate on the hard Brexiteers who have to now weigh up Theresa May’s soft Brexit, or risk an even softer / no deal outcome via the Commons.

09:30 GMT sees the release of Novembers Markit services PMI – Consensus is for a tick higher at 52.5 vs 52.2.

USD: Markets closed for George H.W. Bush

The hopes of a final trade war resolution faded out into Tuesday’s trading session which saw US equities drop more than 3%. Twitter was the fuel to this fire, as Trump once again took off, stating that he would re-ignite tariffs if their differences could not be resolved (China/USA).

Chinese media was quick to try and cool the heat by re-confirming that the G20 meetings had been very successful. They are working towards a 90-day time frame to finalise their negotiations.

EUR: Focus on sluggish growth

Mario Draghi is speaking this morning at 08:30 GMT – he is promoting safe and sound banks in the SSM which wouldn’t warrant any monetary policy statements. This shouldn’t be a market mover.

The main focus is on Eurozone retail sales at 10:00 GMT, as well as the service PMI for Italy and Spain. We are looking for any clues that the productivity level is picking up as activity across the majority of economies remains in hibernation mode.

Italy’s budget battles have now moved them one step closer to an excessive deficit procedure. GDP contracted by 0.1% in Q3 and consumer confidence fell lower in November. There are other warning signs that the Italian economy could sink further, leaving the Euro in a vulnerable spot. This explains to a certain extent why GBPEUR has been able to drift sideways in a narrow band – It’s a race to the last place.

Have a great day.