Article Highlights

  • French flash manufacturing PMI: 53.4 as expected, 53.5 previous
  • French flash services PMI: 53.9 vs. 53.1 expected, 52.9 previous
  • German flash manufacturing PMI: 56.5 vs. 55.4 expected, 55.6 previous
  • German flash services PMI: 53.2 vs. 54.5 expected, 54.3 previous
  • Euro Zone flash manufacturing PMI: 55.1 vs. 54.8 expected, 54.9 previous
  • Euro Zone flash services PMI: 53.6 vs. 53.8 expected, 54.9 previous
  • U.K. public sector net borrowing: £6.4B vs. £6.7B expected, £10.8B previous
  • U.K. Supreme Court voted 8-3 against government on triggering Article 50 of TEU
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The pound went on a wild ride during today’s morning London session, thanks to the U.K. Supreme Court’s ruling. However, the pound ultimately ended up lower against all its peers.

Major Events/Reports:

Precious metals fall, other commodities riseMost commodities were in rally mode during today’s morning London session. Oil was a clear exception, though.

Base metals got some love.

  • Copper was up by 1.04% to $2.675 per pound
  • Nickel was up by 0.68% to $9,752.50 per dry metric ton

Oil benchmarks were also in the green.

  • U.S. crude oil was up by 0.68% to $53.11 per barrel
  • Brent crude oil was up by 0.63% to $55.58 per barrel

However, precious metals got whupped.

  • Gold was down by 0.24% to $1,212.65 per troy ounce
  • Silver was down by 0.31% to $17.133 per troy ounce

Market analysts say that the broad-based rally was due to the Greenback’s earlier weakness. With regard to the turnaround in oil prices, in particular, market analysts also attributed that to signs of tightening in the oil market, as well as signs that oil producers were sticking to OPEC’s oil cut deal. The slide in precious metals, meanwhile, was very likely due to the returning appetite for risk, which dampened demand for the traditional safe-havens.

Risk appetite returns – After yesterday’s gloomy start to the week, signs of risk-taking finally showed up in Europe, with the major European equity indices printing some gains.

  • The pan-European FTSEurofirst 300 was up by 0.34% to 1,430.32
  • The blue-chup Euro Stoxx 50 was up by 0.14% to 3,276.00
  • Germany’s DAX was up by 0.27% to 11,577.00
  • The U.K.’s FTSE 100 was up by 0.19% to 7,164.45

U.S. equity futures were somewhat flat. However, the risk-friendly environment helped to keep them well-supported.

  • S&P 500 futures were slightly up by 0.07% to 2,263.50
  • Nasdaq futures were slightly up by 0.10% to 5,068.38

Market analysts note that mining shares were the main winners, so the commodities rally is apparently the reason for the upbeat mood in Europe.

U.K. Supreme Court Ruling – In an 8-3 majority vote, the Supreme Court ruled against Theresa May’s government, affirming the lower court’s ruling that “an Act of Parliament is required to authorise ministers to give Notice of the decision of the UK to withdraw from the European Union.”

The Supreme Court also ruled on the issue about devolution. And in a unanimous decision, the Court ruled that the U.K. does not have to consult with the devolved legislature of Scotland, Wales, and Northern Ireland in order to trigger Article 50 of the TEU.

In simpler terms, Theresa May’s government does not need permission from Scotland, Wales, and Northern Ireland in order to trigger Article 50 – Parliament’s approval is all that’s needed.

Higher risk of another Scottish referendum? – Scottish First Minister Nicola Sturgeon reacted to the Supreme Court’s ruling, particularly on the devolution issue, by saying that a second Scottish independence referendum was becoming “ever clearer“.

Brexit still on schedule(?) – Shortly after the Supreme Court released its decision, a spokesman for Theresa May told the press that:

“The British people voted to leave the EU, and the government will deliver on their verdict – triggering Article 50, as planned, by the end of March. Today’s ruling does nothing to change that.”

The spokesman then added that “We respect the Supreme Court’s decision, and will set out our next steps to Parliament shortly.”

Theresa May’s next move – As noted above, Theresa May’s spokesman said that the government will be setting out on its next step. And that step would likely be a Brexit Bill to get parliamentary approval to start the actual Brexit process. And according to British MP John Mann, such a Bill may be ready by tomorrow, and a vote can obtained by next week.

However, no matter how you slice it, this does give anti-Brexit MPs (and there are a lot of ’em) a chance to push for amendments, which may then delay Theresa May’s timetable.

Brexit Davis speaks – Brexit Secretary David Davis made his Commons statement earlier, and he confirmed what Theresa May’s spokesman said, as well as what John Mann said. In his statement, Davis said that the ruling does not change the fact that the British people voted for a Brexit. Davis also said that a Brexit Bill to give the government the power to trigger Article 50 will be introduced “within days” and that he hopes anti-Brexit MPs won’t try to abuse that opportunity by delaying the process. He then said that Theresa May’s timetable is still on schedule before saying that the government will fight to get the best Brexit possible.

Major Market Movers:

GBP – The pound inched its way higher ahead of the U.K. Supreme Court’s ruling. And when the Court finally delivered its decision, the pound popped higher across the board as a knee-jerk reaction, likely because the ruling will allow anti-Brexit MPs a chance to push for a “softer” Brexit. However, sellers quickly joined the fray and pushed the pound broadly lower for the rest of the session. And this is likely due to profit-taking by the bulls since the Supreme Court was widely expected to rule against the government. Although it’s also probable the fresh bears were jumping in, especially after Sturgeon said that bit about another Scottish referendum.

GBP/USD was down by 47 pips (-0.38%) to 1.2422 with 1.2533 as session high, GBP/AUD was down by 91 pips (-0.56%) to 1.6408 with 1.6573 as session high, GBP/NZD was down by 110 pips (-0.64%) to 1.7172 with 1.7346 as session high

AUD & NZD – The prevalence of risk appetite and the commodities rally gave the higher-yielding Aussie and Kiwi a double boost. Between the two, the Kiwi had the upper hand, since AUD/NZD was down by 11 pips (-0.10%) to 1.0464 by the end of the session.

NZD/USD was up by 20 pips (+0.28%) to 0.7232, NZD/JPY was up by 24 pips (+0.29%) to 82.00, NZD/CHF was up by 22 pips (+0.31%) to 0.7230

AUD/USD was up by 13 pips (+0.18%) to 0.7570, AUD/JPY was up by 17 pips (+0.19%) to 85.82, AUD/CHF was up by 16 pips (+0.21%) to 0.7566

CAD – The Loonie was the second worst-performing currency after the pound. There was no clear reason why, though, given that oil prices were in the green.

USD/CAD was up by 27 pips (+0.20%) to 1.3293, NZD/CAD was up by 46 pips (+0.48%) to 0.9615, AUD/CAD was up by 37 pips (+0.37%) to 1.0062

Watch Out For:

  • 2:45 pm GMT: Markit’s flash U.S. manufacturing PMI (54.5 expected, 54.3 previous)
  • 3:00 pm GMT: U.S. existing home sales (5.51M expected, 5.61M previous)
  • 3:00 pm GMT: U.S. Richmond manufacturing index (7 expected, 8 previous)
  • 3:30 pm GMT: Australia’s CB leading index (-0.4% previous)

See also:

Asian Session Recap 
U.S. Session Recap

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