Johnson to challenge no-deal law in court

Having lost one set of proceedings in court over Brexit, UK Prime Minister Boris Johnson is going to return to challenge the Bill that Parliament passed recently which forces him to ask Brussels for an extension to Brexit should no deal be agreed by 19th October.

Having suffered the humiliation of a defeat in the courts over his suspension of Parliament, Johnson will want to be sure that he will win the next battle since a defeat would certainly mean his days as Prime Minister are over. He remains adamant that he will not ask for an extension to the October 31st deadline and that the UK will leave on that date with or without a deal.

His contention that he is being stymied by opposition MPs hell-bent on a delay, with an ultimate goal of another referendum, is starting to wear thin with the public who have suffered three years of wrangling over an issue that divides the country like nothing ever has before.

As the gap between London and Brussels remains a chasm, Emmanuel Macron, the French President said over the weekend that a decision on the UK’s revised plans would be published this week.

Following a certain amount of wavering as Johnson tried to “divide and conquer” by appealing to individual leaders like Macron and German Chancellor Merkel, the EU appears to be united again in trying to protect the integrity of both the single market and customs union.

The pound, which has been driven exclusively by Brexit for as long as anyone can remember, continues to gyrate based upon a single issue. It has moved on now from the old “Brexit bad, no deal worse” mantra to “Brexit bad, delay worse” attitude which now prevails.

Yesterday it fell to a low of 1.2287, closing at 1.2291 as the market awaits definitive news over the next milestone.

Considering your next transfer? Log in to compare live quotes today.

Uncertainty over trade and economy driving the dollar

The feeling from market analysts following last week’s publication of employment data for September was one of “if this is an economic slowdown, bring it on”. The addition of 135k new jobs in September and a significant upward revision of the August headline illustrated perfectly the fine balance that exists over what seems to be more perception than any genuine concern that the economy may be falling towards a recession.

The data has been open to interpretation as activity clearly slows but the question remains; “is this a mid-cycle adjustment” as the Fed appears to believe, or “the end of the cycle” which will demand more concerted action.

Jerome Powell’s version of the FOMC has allowed the market to gain the upper hand in the decision-making process by becoming reactive to sentiment as it struggles to resist demands to continue to cut rates initiated by the Administration.

The recent rally in the dollar index to a high of 99.60 owed as much to the weakness of its constituent parts as it did confidence in the U.S. economy. The current correction is a more genuine reflection of the uncertainty over several factors: Is the economy slowing more than is currently believed? Are trade talks between Washington and Beijing progressing to a positive conclusion? Is inflation likely to rise further given the recent cuts in rates? Can President Trump survive the threat of impeachment and remain in power through until next Novembers election?

A period of uncertainty driving a deeper correction will continue for the rest of this month until the FOMC meeting which will be held on 29/30 October. Traders will have little confidence in a view on whether there will be another cut until this month’s data on activity, consumer confidence and inflation are released.
Yesterday, the dollar index traded between 98.74 and 99.01 as it managed to consolidate a little at lower levels.

Weakening Eurozone economy barely raises a market eyebrow

Traders have become so immune to a weakening Eurozone economy that data confirming both a continued slowdown and a coming recession barely register.

Yesterday’s release of figures for German factory orders showed a year on year fall of 6.7% in August. This was appreciably worse than the previous month’s 5% fall and a market expectation for a slight improvement. The month on month data was marginally better than traders had anticipated but remained in negative territory with a fall of 0.6%.

The single currency remains in a slow decline as the market awaits a confirmation that the region is in a recession. This will be nothing more than a reflection of what traders already know.

The only thing that can arrest the continued decline of both the economy and the currency would be a positive plan from either the ECB or the EU Parliament to stimulate growth.

With Christine Lagarde taking over from Mario Draghi next month it may be that everyone is expecting her to deliver the impossible. While she is sure to bring a less bureaucratic and more dynamic presence to the role, it would be a triumph of hope over expectation if she were to introduce policies that arrest the slide, let alone turn it around.

With activity data due next week, together with inflation and economic sentiment, traders are resigned to more bad news. It will take a significant improvement to shake them out of their current tauper but when the economy does eventually bottom out, as it surely must, there will be a large void to fill as the euro begins to rally.
Yesterday, it fell to a low of 1.0961, closing at 1.0971.