Over the last week we saw positive data out of the UK, but unfortunately, due to comments made by PM Theresa May, we didn’t manage to see any strength from the pound. It seems that 2017 is already showing us that political statements still trump economic data, especially in the UK’s case. Sir Ivan Rogers, who recently resigned as the UK’s ambassador, criticised the government for “muddled thinking”. May responded by saying that she is focused on ensuring that the UK takes control of its borders, even if that means no longer being in the single market, and that the UK “cannot keep bits of EU membership”.
The verdict of the upcoming Supreme Court decision is expected between 12th-17th January, and though the markets are expecting the Supreme Court to uphold the High Court’s previous decision, I must make you all aware that nothing is ever guaranteed. We are expecting sterling strength if the decision is upheld, and weakness if the decision changes. Theresa May has also stated that she will speak the very same day of the decision to outline her plans for triggering Article 50 and what her negotiation plans will be with the EU, so even if we do see some strength it may be something that is short lived.
Moving onto economic data, we are expecting an eventful week in the markets, which could translate into some great opportunities for those of you both buying or selling sterling.
On Monday, the majority of key data will be EU focused; at 7 am, we are expecting strong Industrial Production figures out of Germany and an increase in their Trade Balance. At 9:30 am the Eurozone will release their Unemployment Rate figures which are expected to remain on par; if we see any change in these figures there could be cause for some movement on the euro.
Wednesday is when things should get interesting for those of you selling sterling; at 9:30 am the UK will release their trade balance figures. The expectation is that these will come in wider, but as we have seen boosts in manufacturing and a cheaper pound, we could see this figure come in slightly stronger than expected. At the same time, figures for UK Industrial and Manufacturing production will be released, which are both expected strong, which could strengthen the pound.
Thursday will mark the first day of the possibility of the Supreme Court releasing their verdict, so it is at this point I would urge anyone trading the pound to remain aware of this, as it will begin to make the markets sensitive.
We are expecting to see weak jobless claims figures out of the U.S. in the afternoon, which could present some good opportunities for those of you buying the US dollar. Shortly afterwards, BoE Governor Mark Carney will testify to lawmakers. We are not expecting any guidance about interest rates or policy, however, I would again urge all clients to remain aware that this will be ongoing through the afternoon and could have an effect on the markets.
Friday will be filled with positive U.S data, we are expecting strong Retail Sales figures, alongside strong Michigan Confidence data in the afternoon, so for those of you purchasing the U.S. dollar, it seems to make your purchases before Friday may be less risky.
As always, if you have any questions or would like any further clarification on the markets this week please don’t hesitate to contact me directly.