Previous Day's Market Highlights
"Unlawful, void, and of no effect." Those were the words used by Lady Hale, President of the Supreme Court, when handing down a judgement on the Prime Minister's prorogation of Parliament. The Court's judgement, that the 5-week prorogation was unlawful, laid bare the PM's ruse, with the justices labelling the suspension's effects on the fundamentals of democracy as "extreme". With the prorogation unlawful, Parliament was therefore never suspended, hence MPs will reconvene tomorrow, carrying on with the existing legislative programme. Despite the unprecedented judicial ruling, and various calls for his resignation, PM Johnson seemed unperturbed, once again reiterating that the UK would be leaving the EU on 31st October. For markets, the Court's ruling was met with a bout of sterling strength, with investors somewhat reassured that MPs will retain an element of control over the Brexit process. Market participants were likely also reassured by the fact that today's judgement rules out the possibility of another prorogation at the end of October to force through a no-deal Brexit, thus reducing the likelihood of such an outcome. Sterling ended the day 0.5% higher against the dollar, and 0.3% higher against the euro.
Elsewhere, the dollar lost ground after disappointing consumer confidence figures. Data from the Conference Board showed the confidence index fell to 125.1 in September, well below expectations, and a sharp pullback from August's levels, which were the highest since 2000. The unexpected fall means the index is now at its lowest levels since the start of the year, with the decline largely driven by an increase in trade war rhetoric and higher volatility in equity markets. The poor reading sparked concerns that consumer spending may deteriorate in the coming months, fuelling worries over US economic growth. The greenback settled 0.3% lower against a basket of peers, with the currency also dragged down by President Trump's combative address at the UN General Assembly. The President took aim at China during his almost hour-long speech, ratcheting up the trade war by stating that he would not accept a "bad deal" between the two superpowers.
Most other G10s benefitted from the weaker dollar; the euro traded 0.25% higher, the Aussie dollar 0.3% higher, and the Swiss franc and Japanese yen 0.45% higher. The common currency's gains were, however, tempered by a mixed German IFO sentiment survey, which showed business sentiment hovering just above its worst levels in 7 years. Businesses' expectations of future activity also point to further economic softness ahead, with this sub-index falling to a 10-year low of 90.8.
Overnight, the RBNZ kept interest rates on hold at a record-low of 1.00%. Policymakers stated that data received since the last meeting warranted no change to the policy outlook, though a weak easing bias remains in place, with policymakers having scope to inject further monetary stimulus 'if necessary'. This caveat was less-dovish than expected, helping to support the kiwi dollar overnight.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
British politics will continue to dominate in the day ahead, with Parliament set to meet for the first time since early-September just before noon today. The exact order of business is unclear at the time of writing, however Speaker Bercow has made it clear that applications for urgent questions and emergency debates will be considered. Should such debates take place, they will almost certainly centre around yesterday's Supreme Court ruling. Opposition MPs may also table a motion of no confidence in the government, in an attempt to try and force a general election, however any such attempts will likely be put on ice until a no-deal Brexit has been definitively ruled out. Sterling will remain susceptible to political developments; with the pound set to continue moving in line with the shifting probability of a no-deal Brexit.
On the data front, today's calendar is lacking in any significant releases. No data points are scheduled from either the UK or the eurozone, while the US calendar is unlikely to result in significant volatility. This afternoon's new home sales figures are expected to show 660,000 sales in August, broadly in line with the recent trend. Today's only other notable release will be the monthly Swiss ZEW sentiment survey, though the near-term direction of the franc remains largely dependent on shifts in global risk appetite.
Central bank speakers will likely be of more interest than today's economic releases. Market participants will pay close attention to remarks from two voting members of the FOMC, with investors continuing to grapple with the US monetary policy outlook. Remarks from dovish Chicago Fed President Evans, and hawkish Kansas City Fed President George, will be parsed for any hints on the future direction of interest rates. Meanwhile, this morning's comments from ECB Governing Council members Coeuré and Lautenschlager will likely see a reiteration of policymakers recent push for fiscal stimulus.
Today's Economic Calendar
|9:00am||CHF||ZEW Survey - Expectations (Sep)||-37.5|
|3:00pm||USD||New Home Sales (MoM - Aug)||0.66mln||0.635mln|