Where the market drivers are holding October 28, 2016
North Ireland court takes the side of the government
EZ Business Confidence improves
Nikkei is at 0.63%, while the Dax is -0.35%
Oil trading at $49/bbl
Gold trading at $1267/oz
Europe and Asia
EZ: Business Confidence is 106.3 versus 104.4
U.S. dollar: GDP of 8:30
U.S. dollar: U of M is at 9:55
The Asian and early European sessions had a quiet night, on the last work day of the week for trading. The quiet was except cable, which was shaken again following Brexit news.
Northern Ireland’s high court supported the ruling about the referendum on the EU announcing that:
"It is not reasonable for the high policy matters; it is the view of the court that the issue which is triggering Article 50 that fits the classification and it is not subject to a judicial review."
With this court ruling, the pathway is clear for the UK government to continue with their plans, although there are more challenges for it in the British courts before there can be a full dismissal of the legal objections.
Cable plummeted below the 1.2150 mark following the news. However, it maintained support at the 1.2100 level, even though it continues to feel pressured. There has been a huge overselling on the single currency, but with little prospect for a compromise for the Brexit issue, the political forecast does not look promising. Any recovery is more than likely to be short-lived unless the market sees a ray of positive news.
At the same time, today in the US, there will be a complete focus on the GDP data. There is the expectation that the market would have a strong rebound from the previous month’s 1.4% to 2.5%. Some analysts are hoping that consumer spending and capital expenditures will bump it up to 2.9%. If the GDP does go up, it could cause an rally for the USD/JPY, with a result of 105.50 or even a result of 106.00, with the probability of a December rate hike for the Fed, which is almost certainly to be settled.
On the other hand, with the weakness in the consumer sentiment and circumstances following that Retail Sales missed two out of their past three months of forecast, there is a good chance that the GDP number may feel a loss. A marginal loss may not be enough to give much of an effect on the USD/JPY pair. But if the data prints are closer to 2.0% than they are to 2.5%, there could be a huge unwind of the rally this week, as a result of the new doubts about the Fed policy, which may sneak into the market.