Pound fluctuates on Supreme Court ruling; Loonie jumps on pipeline deal

The pound see-sawed in today’s European session as the British currency saw volatility both before and after the Supreme Court’s ruling on the triggering of Article 50.

The US dollar recovered from earlier lows, while the Canadian dollar surged after Donald Trump approved the construction of a major pipeline from Canada to the United States.

The greenback struggled for upwards momentum on Tuesday as it attempted to move away from multi-week lows.

The dollar index pared most of its losses by late European session to stand only marginally lower at 100.07, having earlier briefly dipped below 100. This was enough however to give the Japanese yen a bit of a respite from two days of broad gains against its peers.

The dollar was about 0.5% firmer at 113.29 yen in late European trading, and the euro was up a similar amount at 121.83 yen.

Data out of the US today was mixed as a strong manufacturing PMI was offset by weaker-than-expected housing numbers. Markit’s flash estimate of the manufacturing PMI in January came in above expectations. The index rose from 54.3 to 55.1 in January, beating forecasts of 54.5. This was the highest figure since March 2015.

Existing home sales meanwhile disappointed as they missed estimates of a 1.1% drop to decline by 2.8% to 5.49 million.

The Eurozone also saw the release of flash PMI data. The composite and services flash PMIs both missed analysts’ expectations. The services PMI fell by 0.1 to 53.6 and was against expectations of 53.9. The composite PMI was also down by 0.1 to ease to 54.3 in January, missing forecasts of 54.5.

The manufacturing flash PMI was positive however, coming in at 55.1 and exceeding analysts’ forecasts of 54.8. This was the highest reading for the manufacturing PMI in almost 6 years.

The figures were welcomed by the markets as they were comfortably above the 50-mark that distinguishes contraction from expansion and helped support the euro. The single currency was flat at 1.0755 dollars in late European session.

The UK Supreme Court announced its eagerly-awaited decision on the government’s appeal to overturn the High Court’s ruling that it needs to obtain parliament’s consent before triggering Article 50. The Supreme Court ruled against the government, saying only parliament had the authority to overturn EU legislation given that much EU law is embedded into UK law.

The UK’s Brexit Secretary responded by saying the government will put forward a bill to parliament within days.

The pound spiked up after the Court’s ruling before slipping to 1.2418 dollars. But the British currency staged a late recovery to climb towards it Asian session highs and was last trading at 1.2511 dollars.

One of the strongest performers of the day was the Canadian dollar which rallied after it emerged that President Trump will approve the construction of the Keystone XL pipeline. The crude pipeline project is designed to transport oil from Canada’s Alberta region to the Gulf Coast area in the United States. The US dollar slumped to a near one-week low of C$1.3142 on the news.

Adding further support to the loonie were firmer crude oil prices. US crude was up over 1% at $53.40 a barrel in late session.

In other currencies, the Turkish lira came under pressure after Turkey’s central bank surprised markets by keeping its one-week repo rate unchanged at 8.0%. Expectations were for the central bank to hike rates by 0.50% to stem the lira’s slide.

Instead, the central bank raised its overnight lending and borrowing rates, which only had partial success in defending the lira. The dollar was last up 0.4% at 3.7710 liras.

by XM Investment Research Desk

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