Court Approves Article 50 Challenge, Pound Close to 1-Month High against US Dollar

Modified: Thursday, 3 November 2016 14:35 BST - Written by Minesh Chaudhari

STORY LINK Court Approves Article 50 Challenge, Pound Close to 1-Month High against US Dollar

’Super Thursday’ Sees GBP/USD Exchange Rate Soar despite BoE Pessimism

The Pound has been having its best day of trading for a long time today, having jumped to 1.24 against the US Dollar and recorded major gains in all other pairings.

The source of this wild investor enthusiasm has been a High Court ruling which has rendered the Government unable to trigger Article 50 without a vote in Parliament. While the Government has appealed, hopes remain high that the terms of Brexit, and perhaps an EU exit itself, will now be subject to change.

Elsewhere, both the October services and composite PMIs rose instead of falling as forecast; this served as a supportive appetiser to the High Court ruling.

In less helpful developments, the Bank of England (BoE) has predicted that unemployment could hit 5.5% by mid-2018 (it currently rests at 4.9%), and that inflation may hit 2.75% by the end of 2017. This would cause significant troubles for those on low-incomes who are already struggling with a glacial pace of wage growth.

British Pound Forecast to Drop Off in Near-Term if Profit-Taking Exceeds Optimism

The Pound’s next movement against the US Dollar may unfortunately be a sharp decline, on account of excess profit-taking by investors who are capitalising on a higher value Pound.

The next data to watch out for will arrive on Tuesday, when September’s manufacturing and industrial production results for September are due. At the time of writing, an annual drop was forecast for the industrial result along with a manufacturing reprint at 0.5%.


Also out on Tuesday will be the National Institute of Economic and Social Research (NIESR) GDP estimate for the three months to the end of October; this is set to dip from 0.4% to 0.3%.

US Dollar Demand Remains Low as Election Runs on a Knife-Edge

The weekend’s extraordinary FBI involvement in the US election has taken its toll on the US Dollar, which has failed to fully recover against the Pound.

While the Fed has stayed on track for a December interest rate hike after freezing the rate again in November, this has failed to dispel the overwhelming sense of alarm among USD investors that Trump could scrape a win on November 8th.
Polls continue to foresee a Clinton victory as more likely, though these records are known for having margins of error and ever since the EU Referendum, polling stats have been taken with a pinch of salt.

US Dollar Turbulence Expected to Increase as November 8th Vote Day Approaches

The present instability seen for the US Dollar is only expected to increase as November 8th approaches, irrespective of positive preceding data.

This afternoon will bring the US composite, services and non-manufacturing PMIs for October; the first two are expected to rise while the more high-impact latter result has a slip in store.

Looking to Friday, the Fed’s likelihood of raising rates in December may be influenced by the unemployment rate and change in non-farm payrolls outcomes for October. A payrolls rise from 156k to 180k has been forecast, along with an unemployment rate stagnation at 5%.

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