Theresa May Gets to Make Brexit Call Official, but U.S. Dollar Rises on Scottish Freedom

USD

The U.S. Dollar improved its fortunes against most European counterparts, while freezing against commodity-based currencies. Although China’s economic outlook is improved, commodities remain mostly fragile and headed downward in price along with oil.

Data out of the U.S. earlier revealed that Producers Price Index is on the rise with a year-on-year growth of 2.2% above the expected 1.9%. Demand from companies is increasing and that translates into inflation as well. Overall, positive things the Fed finds satisfying and comforting.

Inclement weather is likely to keep fluctuations and market activity subdued throughout the day in addition to the cautious approach until tomorrow’s big Fed announcement. Any headlines could move the needle, but we foresee light movements as the day goes on.

 

EUR

The Euro is trading in familiar ranges, but it should be noted that economic data continues to impress. Inflationary growth in Spain is now the highest in five years. All eyes are on the Dutch general election tomorrow, thus we see the EUR/USD pair staying around current levels with an upside for Euro based on potential positive reaction to improved indicators.

 

GBP

The British Pound is trading around its worst levels since January following news of a determined Scotland starting the legal process to have a referendum over separating from the United Kingdom. First Minister Nicola Sturgeon threw a cloud of rain on Prime Minster Theresa May’s parade after the British head of state got Parliament to approve the invocation of Article 50 of the Lisbon treaty. May is expected to exercise this power at the end of the month as most officials are asking for prudence heading into such unchartered territory.

Scotland voted to “Remain” in the EU back on June 23rd when the Brexit result shocked the world. A prior referendum on leaving the UK was defeated because many in the population thought abandoning Britain would affect Scotland’s participation in the single market. Now that it’s clear the UK will not back down and a 2-year process nears its beginning, Sturgeon believes her people will support independence and seek refuge within the European mechanism. GBP could sink tremendously as our outlook estimates.