Sterling’s gains last week due to High Court Ruling – 7th November 2016
Sterling’s gains last week due to High Court Ruling – 7th November 2016
Politics and politicians had the biggest impact on currencies toward the end of last week and during the weekend. In Sterling’s case it was the judges decision to involve Parliament in the Brexit process, which is a mixed blessing for Brexiteers. For the US Dollar it was the FBI’s volatile relationship with Hillary Clinton.
Over the weekend the FBI admitted that Hillary Clinton will not be charged with using her own email address in her role as Security of State, as looked possible a couple of weeks ago, lifted a major shadow lifted from her campaign and thereby decreasing Mr Trump’s chances. This news saw the Mexican Peso strengthen by nearly 4% while the Yen lost nearly 1% against Sterling as the chance of trade wars and protectionism have lessened.
In London the high court ruled on Thursday that parliament must approve activation of the Article 50 which will start the process by which Britain will leave the EU. Some, including those who had campaigned most stridently for parliament to take back control of its sovereignty, were taken aback by the decision. Investors, however, saw it as a good thing for Sterling sending it higher, making it easily Thursday’s top performer. It starts today up by an average of 1.3% from Thursday morning’s levels.
On Thursday the Bank of England contributed to Sterling’s well-being and on Friday the US Bureau of Labor’s employment report was vaguely helpful to the US Dollar. The Bank of England said it had abandoned any plans for a further rate cut and doubled its growth forecast for the UK economy, adding to the positive mood created by the high court’s judgment on Article 50. Governor Mark Carney also spoke of accelerating inflation, further reducing the chance of a rate cut. In the US, Federal Reserve leaders implied that the jobs situation posed no threat to a December rate hike.
Friday’s report of a 161,000 monthly increase in non-farm payrolls fell short of the market’s expectations but upward revisions to the August and September data left employment a net 30,000 ahead of forecast. Two Fed regional presidents and vice-chairman Stan Fischer suggested that the numbers were strong enough to support a rate increase next month.
There is no big news on today’s list however, there will be a last-minute flurry of opinion polls which may or may not provide a reliable guide to Tuesday’s US election result. The current wisdom has it that President Clinton would be positive for the US Dollar because she would perpetuate the status quo. President Trump would inject a big dose of uncertainty and pose a threat to global trade. The opinion polls’ gap between the two is narrower than their margin of error. That means every chance of increased volatility today.