Don’t Pannick Mrs May

7 December, 2016

Robin Haynes

Yesterday saw the second day of the Supreme Court’s hearing into whether the government has the legal authority to trigger Article 50 of the Lisbon Treaty without Parliamentary approval. Arguing against the government was Lord Pannick, who set out his case detailing why the government cannot use ‘prerogative powers’ to enact Article 50; while the case continues today, currency and financial markets have so far been unmoved. Earlier in the proceedings, James Eadie QC for the government, stated a single-line Parliamentary Act might be a solution, so if ministers do lose the case, we will not necessarily see Article 50 delayed or a subsequent boost for the Pound due to prolonged UK membership of the European single market.

The case is still likely to cause some movement for exchange rates, although a decision is not expected until January. Meanwhile, Theresa May has accepted that she will need to publish some Brexit plans before Article 50 is triggered, under a motion that will be debated in the Commons today.

Euro GDP improves
In economic releases yesterday, Eurozone GDP came in slightly better than expected, keeping the price of the Euro a little higher than we saw at the beginning of the week. Despite the Italian referendum result it seems that the Euro is reluctant to fall any further in price, so current rates are looking attractive to those of you sending Euro payments in the coming weeks. Indeed the single currency is nearly 7% cheaper than its post-referendum peak, which has been a pleasant surprise for many Euro-buyers.

Elsewhere yesterday, Australian interest rates were held at 1.5% as expected, and the US trade balance was weak, sending the Greenback a little cheaper in afternoon trading.

Busy day ahead
Today we have industrial & manufacturing figures in the UK at 9.30, but the NIESR GDP estimate at 3pm is the most important economic release, as it is usually an accurate estimate of official UK economic growth. Any reduction in the previous 0.4% estimate would be likely to send the Pound lower, and vice versa.

We also have an interest rate decision in Canada today, as well as some minor figures from Germany, France and Spain, to keep the markets moving. With the Pound unexpectedly resurgent against many currencies in recent weeks, is it worth risking those gains by holding out for any further improvement?

Finally for Euro buyers and sellers, tomorrow we have Mario Draghi’s last key monetary policy statement and press conference of the year.