Pound surged more than 1 percent on Thursday as UK Supreme Court ruled that UK government should obtain Parliament vote before triggering Article 50 of Lisbon Treaty to initiate Brexit process. With this decision smooth UK quit is under question as its uncertain whether parliament is ready to deliver sufficient vote to May’s government to make her able to act on the Brexit case within a law. Nevertheless the decision will be appealed and hearings are set for December
Pound was anxious for growth catalysts so reacted swiftly to the news:
Support to the British currency was also offered by upbeat industry data released today and BoE rate decision which is expect to stand pat this meeting. Markit service PMI, one of the gauges of consumer inflation in UK rose at fastest pace since January. The sector expanded at 54.5 points from 52.6 in October. Consensus was at 52.4 points.
The survey also showed that the weak pound had a marked increase in price pressure on the service providers in October. Inflation factors of production rose to its highest level since March 2011, the report said.
Mark Carney, BoE head had extended its stay in the office as he would like to pass through complete Brexit process being at the wheel of the Central Bank. Earlier during his speech at House Lord Committee he hinted that plunging rates more could be a blow for falling Pound and further depreciation of the currency should be avoided.
On Wednesday, Federal Reserve didn’t change its policy also hinted its needs “some” other evidence which supports rate hike. Probably FED waits for the US elections outcome as markets puts great importance on this event. US economy is close to FED targets and now markets price in about 80 percent of odds of rate hike in December.
Dollar index halted free fall from its January peaks with USDX trading at 97.36 (-0.03%) on Thursday
Chinese market rose after CAIXIN survey found signs of economic stability in the country; In addition, market sentiments were also propped up with the forthcoming introduction of the mechanism of cross-trading exchanges between Shenzhen and Hong Kong.
CSI300 index consisting of blue chips rose 1 percent to 3.365,09 points, while the Shanghai Composite Index added 0.8 percent to 3.128,94 points.
Earlier Thursday, CAIXIN report indicated the acceleration of China’s service sector growth in October, firming the confidence in stability of second-largest economy in the world.
Purchasing Managers’ Index of Caixin / Markit (PMI) rose to 52.4 in October, taking into account the seasonal adjustment from 52.0 points in September, which was the highest level since June. Most sectors rose, led by the rise of the stock of infrastructure and financial sectors.