The Pound to New Zealand Dollar exchange rate rose after UK services sector data beat expectations and the Government lost the right to trigger Article 50 without the approval of the UK Parliament.
The GBP/NZD exchange rate rose on Thursday November 3rd following news the UK Government lost its High Court case which sought to defend the Government's right to Trigger Article 50 of the Lisbon Treaty without the approval of Parliament.
Markets tend to like the idea of Parliament having more say in the Brexit process noting the pro-EU stance of the majority of MPs.
However, we see this as ultimately being a GBP-negative event as it only increases uncertainty surrounding an inevitable event.
The Government will appeal the ruling so we will have to go through the whole process again it would appear.
Sterling was however firmer following the release of better-than-forecast Services PMI data from Markit and the CIPS.
The data, which gives a snapshot of the all-important services sector, read at 54.5, well ahead of expectations for 52.4 with Markit noting:
“The dominant UK service sector moved up a gear at the start of the final quarter of 2016.”
Again, the weaker Pound appears to be helping:
“Faster growth of total business activity was driven by a stronger expansion of incoming new business. New contracts rose at the fastest rate in nine months. Firms linked new work to new business opportunities, rising international demand linked to the weaker pound, improving market confidence and promotional campaigns.”
Service providers in the UK continued to add to their workforces in October. Employment increased for the third month running, albeit with the rate of job creation remaining well below the marked rates achieved in 2014 and 2015.
GBP/NZD rose from 1.6914 to 1.6933 on the news - a discernible jump was noted.
We wrote at the start of the week that Sterling was due some relief, could this be a trigger to such a move?
However, we note that the Pound remains tilted lower against the New Zealand Dollar with no technical structure to suggest the post-referendum sell-off is nearing completion.
However, we will be watching temporary support at 1.69 for any suggestion that a floor is forming:
As can be seen GBP/NZD is yet to close below this level in 2016 and should it continue to do so then we may get a little more optimistic on Sterling’s prospects going forward.
Note that there is a great deal of news and events on the agenda for Sterling on Thursday the 3rd November so we could well see some big moves.
Keep an eye on:
- Services PMI at 09:30 (beat expectations pro-NZD)
- The court ruling on Article 50 between 10:00 and 10:30
- The Bank of England policy decision and quarterly inflation report at 12:00
- Governor Carney’s press conference at 12:30
If things don’t go the Pound’s way then GBP/NZD could fall below that support at 1.69.
We have a feeling that Sterling has absorbed a great deal of negativity over late and there is the chance that some upside relief is due.
Indeed, analysts at Nordea Markets have cited five reasons to back a recovery in Sterling.
By the close of play on Thursday we should have some answers