The British pound dipped lower but has rebounded in the Tuesday session. In the North American session, GBP/USD is trading at the 1.25 level. Earlier on Tuesday, the UK Supreme Court ruled that the government needed obtain parliamentary approval before triggering Britain’s exit from the European Union. On the release front, Britain’s budget deficit narrowed to GBP 6.4 billion, beating the estimate of 6.7 billion. In the US, Existing Home Sales fell to 5.49 million, short of the forecast of 5.55 million.
The legal twists and turns surrounding Brexit continued on Tuesday, as the UK Supreme Court denied the government’s appeal regarding Article 50, the mechanism to trigger Britain’s departure from the European Union. The court ruled that the government could not invoke Article 50 prior to receiving approval from both houses of parliament. The ruling was clearly a setback for the government, which tried to downplay the decision. What happens next? In order to commence the exit from the EU, the government must now draft legislation which states that parliament approves of the government triggering Brexit under Article 50. Although there are plenty of Remain supporters in parliament, approval of the legislation is widely expected. What is less clear is whether Theresa May can stick to her timetable of triggering Article 50 at the end of March, as anti-Brexit members of parliament could propose amendments to delay the legislation and push off the March deadline.
Donald Trump has barely warmed his new chair in the Oval Office, but dramatic change is already underway. On Monday, Trump signed an executive order formally withdrawing the US from the Trans-Pacific Partnership, a broad trade agreement which the US had signed but not ratified. Trump had promised to leave the TPP during the election, arguing that the deal would hurt American workers. Next stop is NAFTA, which Trump has said he will renegotiate with Canada and Mexico. Trump has taken a tough line on US companies that have moved production outside of the US and has threatened to impose tariffs on companies that move production to Mexico. Predictably, these protectionist measures are raising concerns in the markets that the US economic growth could drop if the US takes an isolationist stance towards global trade, and such a stance would likely weigh on the US dollar. US trade partners could choose to retaliate against Trump’s moves, igniting a trade war in which there are no winners.
Tuesday (January 24)
- 4:30 EU Membership Court Ruling
- 4:30 British Public Sector Net Borrowing. Estimate 6.7B. Actual 6.4B
- 9:45 US Flash Manufacturing PMI. Estimate 54.6. Actual 55.1
- 10:00 US Existing Home Sales. Estimate 5.54M. Actual 5.49M
- 10:00 US Richmond Manufacturing Index. Estimate 7. Actual 12
*All release times are GMT
*Key events are in bold
GBP/USD for Tuesday, January 24, 2017
GBP/USD January 24 at 11:15 EST
Open: 1.2514 High: 1.2444 Low: 1.2413 Close: 1.2509
- GBP/USD has posted slight losses in the Asian and European sessions. The pair is steady in North American trade
- 1.2351 is providing support
- 1.2471 is a weak resistance line. It could break in the North American session
Further levels in both directions:
- Below: 1.2351, 1.2272, and 1.2111
- Above: 1.2471, 1.2579, 1.2674 and 1.2775
- Current range: 1.2351 to 1.2471
OANDA’s Open Positions Ratio
GBP/USD ratio is showing slight gains in short positions. Currently, long positions command a majority (58%), indicative of trader bias towards GBP/USD reversing directions and moving upwards.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.