Parliament to approve Brexit trigger

The Day So Far

The big story of the morning was the Supreme Court ruling in that the UK government must hold a parliamentary vote before triggering the EU exit process – in essence ratifying what was decided by the UK High Court late last year. The announcement was largely as expected and means that the for the moment Theresa May’s plan of triggering Article 50 by the end of March remains intact. Initial reports have suggested the May will aim to rush through a bill as soon as tomorrow in order to fit with her predefined timeline, however, several comments have already surfaced as to potentially disrupt the speed of execution with Labour, Liberal Democrats, and the SNP all suggesting multiple amendments; the latter vowing to put forward 50 “serious and substantive” amendments to UK government legislation according to the FT.

My own personal view here is that the politicians will want to make a point in winning this latest claim, hence the threat of amendments, but in reality I do not see this being a deal breaker in the government’s ability to trigger Article 50 by the end of March. Any Bremainers will ultimately have to concede to the fact that in the end the people of Britain voted to leave the EU and as such regardless of view this process must now get underway. What happens post the Article being triggered will be the most telling as then the stop clock is activated and the pressure will be on, not forgetting that any package will likely be vehemently discussed in Parliament.

Looking at how Cable reacted to the event I am not entirely surprised that the upside on the conclusion of the matter was limited given the 500 pip rally that has occurred since last weekend, and a degree of buy the rumour sell the fact type price action has since occurred. This then brings back the other side of the trade which makes the case for higher GBP/USD in the near-term more compelling in that the US Treasury Secretary nominee Steven Mnuchin said last night that an “excessively strong dollar” could have a negative short-term effect on the economy, a reaffirmation of the words uttered from the President just one week ago.

The Day Ahead

Although the USD has seen a recovery from the overnight lows on the back of the verbal intervention by the US administration we still feel that under Trump there is a definite strategy to weaken the greenback in the near-term. This then coupled with the Supreme Court ruling means that we are anticipating a point to re-enter long positions in both EUR/USD and GBP/USD. Meanwhile, we favour upside in crude oil with yesterday’s low and S1 at $52.21 our entry point, while looking for a long in the S&P from S1 (2252.75).