Brexit not irrevocable: European Court of Justice

3 minute read

USD

In the back half of the field the USD lost 0.4% to its main benchmark, the EUR. The decline seems principally to have been the result of what, on the face of it, was a strong reading from the ISM's manufacturing sector purchasing managers' index. It was a point and a half higher on the month and two points above forecast at 59.3. However, the "prices paid" component, which measures the cost of raw materials, slumped 11 points to 60.7. Prices are still rising, as they have for 33 consecutive months, but much less quickly. The inference is that upward pressure on inflation is subsiding. If it is, the Fed will be less aggressive with its policy-tightening program. A rate hike in two weeks' time is still assumed but investors are no longer relying on two or three more in 2019.

EUR

An uneventful day for the EUR saw it potter along in the middle of the pack. Spanish unemployment was fractionally lower in November and the pan-Euroland producer price index was up by a monthly 0.8%, leaving it 4.96% higher on the year. The only real news from the euro zone was an opinion this morning from the European Court of Justice's most senior advisor. He revealed that Britain could unilaterally reverse its decision to leave the EU.

CAD

Early gains by the USD were reversed overnight, leaving the USD an almost invisible 0.1% lower against the CAD. A 1.7% rise in oil prices was theoretically, if not practically, helpful to the Loonie, as was a one-point rise in the Markit purchasing managers' index for the manufacturing sector. At 54.9 the index touched a three-month high, driven by a record (for that particular survey) rise in employment. 

GBP

This morning's purchasing managers' index for the UK construction sector was almost as impressive as Monday's manufacturing sector reading had been. At 53.4 it, too was ahead of forecast and higher on the month. The biggest help to the GBP was this morning's announcement by the European Court of Justice, which was released just as London opened. If Britain can revoke its decision - known as the Article 50 declaration - to leave the EU, and if Parliament rejects the prime minister exit plan next Tuesday, it is not inconceivable that the country could remain within the EU if the lawmakers decide that is the best option. That involves an awful lot of "ifs" but the possibility was worth a net 0.2% to the GBP against the USD.

JPY

Although there were no Japanese economic statistics to help it along the JPY managed to strengthen by 0.6% against the USD, a little less than the 0.7% gain scored by the CNY. The trade war truce between China and the States was a positive factor for both currencies, even though the White House is apparently unable to explain what is involved in the "incredible deal" struck by the two presidents.

 
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