It was another day dominated by British politics, the Scottish appeal court unanimously ruled that Boris Johnson has suspended parliament unlawfully. The judges stated the decision to suspend parliament was ‘an egregious case of clear failure to comply with generally accepted standards of behaviour of public authorities’ and that ‘it was to be inferred that the principal reasons for the prorogation were to prevent or impede parliament holding the executive to account and legislating with regard to Brexit’.
This ruling does not signal a return to the commons as the government will appeal the ruling in the high court. A no-deal Brexit could result in rising food and fuel prices, disruption to medicine supplies and public disorder on Britain’s streets, according to secret documents the government was forced by MPs to publish on Wednesday.
A five-page document spelling out the government’s “planning assumptions” under Operation Yellowhammer – the government’s no-deal plan – was disclosed in response to a “humble address” motion. All in all the suspension of parliament does not look like the debate on Brexit will simmer down, and it’s very likely the market will continue to respond to news as it breaks.
Mario Draghi chairs his last interest rate-setting meeting as president of the European Central Bank (ECB) at midday today. The consensus expectation is that Draghi and co will cut the ECB’s main interest rate by 10 basis points (0.1 percentage points) to minus 0.5 per cent in a bid to spur stubbornly low Eurozone growth and inflation. Eurozone growth has slowed further since the ECB’s gloomy last meeting in July. The German economy, the zone’s biggest, contracted in the second quarter. The euro could be set for a big move today should we see less or more stimulus than is being priced in.
Sterling is trading above the 1.23 level, which has formed a firm level of support. The publication of the worst-case scenario on a no-deal Brexit has done little to the pair, on the upside immediate resistance is at 1.2350. The pair looks set for a breakout and weak consumer price data from the US later this afternoon could see the 1.24 level broken for the first time since July.
GBPEUR is trading a tight range between 1.1180 and 1.1210 as the market awaits the ECB rate decision at midday today. We have seen the Euro weaken considerably over the past month against the Pound and if we see Mario Draghi indicate that there will be another rate cut from the ECB along with other stimulus measures we could see the pair move significantly higher. The rate decision and press conference begins at midday today and will be closely watched by the market.
The pair is being supported at the 1.10 with very little movement in the pair, the market is pricing in a rate cut of 10 basis points and some Quantitativeeasing much of this has already been priced into the market. Anything that exceeds or undershoots the markets expectations could see the market move significantly.
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