A quiet day in the end for Sterling – 25th January 2017

A quiet day in the end for Sterling

Despite the furore and media frenzy surrounding the Supreme Court ruling on Brexit, it was actually a quiet day in the end for Sterling. For the second time in a week the Government’s artful management of market expectations allowed Sterling to emerge unscathed from a potentially volatile situation. First it was Theresa May’s Brexit speech, this time it was the Supreme Court’s ruling on the activation of Article 50. Investors had been primed to expect that MPs would be granted a vote on the initiation of the EU exit process: they got it. There was some initial disappointment that regional assemblies – especially the one in Edinburgh – would not be given a say but by lunchtime Sterling was back on its horse.

The remaining disenchanted bears eventually gave up the ghost in late afternoon when Sterling popped a quarter of a cent higher against the Euro and the US Dollar. On the day it was up by one Japanese Yen and is a third of a cent higher against the Euro. Its only losses were to the Canadian Dollar and the South African Rand.

Having been wounded by the prospect of Trump-induced import duties and the potential dissolution of the North American Free Trade Association the Canadian Dollar received a helping hand from the new US president yesterday. In another executive order he resurrected the Keystone pipeline to carry oil from Alberta to the Gulf of Mexico. The news saw the Canadian Dollar strengthen by half a US cent and it went up by more than a cent against Sterling.

Tuesday’s economic data consisted of provisional purchasing managers’ index readings from the Eurozone and the US which on average beat expectations. Australia started proceedings today with a set of inflation numbers that came in below forecast. The figures from New Zealand follow tonight. There will be very little in between to command investors’ attention.

The Australian consumer price index rose by 1.5% in the year to December which was lower than expected and cost the Aussie nearly a cent on the day. The CPI figures from New Zealand are forecast to put inflation at 1.2%, considerably higher than the 0.4% reported three months ago.