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The pound caught a bid before the morning London session even rolled around and continued to attract buyers throughout the session and despite the worst-than-expected U.K. services PMI reading.

There were no catalysts for the pound’s rise, but some market analysts were pointing to higher odds that Brexit may be reversed.

The Aussie and Kiwi, meanwhile, were actually mostly range-bound during the session. They did close out the session on a lower note, though, probably because of the risk-off vibes in Europe.

Aside from those three, the euro is also noteworthy since it caught a bid at around the same time that the pound did and even closed out the session in second place, so growing hopes that Brexit may be cancelled may have also pushed the euro higher.

  • Spanish services PMI: 54.0 vs. 53.9 expected, 54.0 previous
  • French final services PMI: 55.1 vs. no change from 55.0 expected
  • German final services PMI: unchanged at 53.1 as expected
  • Euro Zone final services PMI: 53.4 vs. no change from 53.1 expected
  • U.K. services PMI: 50.4 vs. 52.5 expected, 52.2 previous
  • Euro Zone retail sales m/m: 0.3% vs. 0.2% expected, -0.5% previous

Major Events/Reports:

U.K. services PMI

Markit released the U.K.’s November services PMI report earlier, revealing that the headline reading slumped from 52.2 to 50.4, which is the worst reading since July 2016 and is within sniffing distance of the 50.0 stagnation level.

The reading is also very disappointing since the consensus was for a slight improvement to 52.5.

And commentary from Markit didn’t really help to remove some of the disappointment since survey respondents “signalled a slowdown in new business growth for the third month running during November.”

Also, “the latest upturn in new work was only marginal and the weakest seen since July 2016.”

Moreover, “The latest upturn in employment numbers was only modest and the weakest recorded for four months.”

But on a more positive note (for consumer spending), there was anecdotal evidence for “rising staff salaries” even as “input cost inflation eased to a six-month low during November.”

But on a more downbeat note (for CPI), “The rate of prices charged inflation was one of the weakest seen since mid-2017.”

Brexit legal advice released

Yesterday, MPs found Theresa May’s government in contempt of parliament for failing to provide the full legal advice on Theresa May’s Brexit deal.

And today, the government finally relented and the Attorney General’s Office released the 6-page full legal advice late into the session.

And, well, the main takeaway is that concerns that the backstop solution to the Irish border issue may be a way to keep the U.K. within the E.U. were confirmed since the document stated that:

“[D]espite statements in the protocol that it is not intended to be permanent, and the clear intention of the parties that it should be replaced by alternative, permanent arrangements, in international law the Protocol would endure indefinitely until a superseding agreement took its place, in whole or in part, as set out therein. Further, the Withdrawal Agreement cannot provide a legal means of compelling the EU to conclude such an agreement.”

The document also noted that:

“In the absence of a right of termination, there is a legal risk that the United Kingdom might become subject to protracted and repeating rounds of negotiations.”

Another risk-off day in Europe

Risk aversion continued to plague Europe, sending most of the major European equity indices lower for another day.

And according to market analysts, today’s bout of risk aversion is still due to fears of a potential recession in the U.S., as well as lingering doubts that the trade war truce between the U.S. and China will lead to a peace treaty.

  • The pan-European FTSEurofirst 300 was down by 0.81% to 1,403.20
  • Germany’s DAX was down by 0.79% to 11,246.33
  • The blue-chip Euro Stoxx 50 was down by 0.74% to 3,165.55

Major Market Mover(s):

GBP

The pound started the session running since it already encountered buyers a couple of hours before the morning London session even rolled around.

The pound then continued to move higher, wobbled for a while when the U.K.’s services PMI report failed to impress, then resumed moving ever higher before finally encountering sellers again when the Attorney General’s Office released the full legal advice.

As to what spurred demand for the pound, there were no apparent catalysts, but some market analysts were pointing to growing hopes that Brexit will be reversed, thanks to yesterday’s ECJ Advisory Opinion coupled with Theresa May’s setback in Parliament.

GBP/USD was up by 69 pips (+0.54%) to 1.2773, GBP/AUD was up by 101 pips (+0.58%) to 1.7508, GBP/NZD was up by 112 pips (+0.61%) to 1.8455

AUD & NZD

The Aussie and Kiwi were nudged broadly lower during the morning London session, likely because of the risk-off vibes in Europe.

NZD/USD was down by 4 pips (-0.06%) to 0.6921, NZD/JPY was down by 10 pips (-0.14%) to 78.20, NZD/CAD was down by 13 pips (-0.15%) to 0.9186

AUD/USD was down by 4 pips (-0.06%) to 0.7294, AUD/JPY was down by 10 pips (-0.12%) to 82.43, AUD/CAD was down by 12 pips (-0.13%) to 0.9683

Watch Out For:

  • 3:00 pm GMT: BOC monetary policy announcement (Overnight Rate steady at 1.75% expected)
  • 7:00 pm GMT: The Fed’s so-called “Beige Book” will be released
  • U.S. markets closed for national day of mourning in honor of the late U.S. President Bush