Brexit Faces a New Hurdle

Stunning financial markets, the UK High Court has handed down a ruling insisting that MPs must form a majority to approve any move to exit the European Union.  Although the government has promised to appeal the ruling, with another hearing scheduled in December, the move significantly reduces the negotiating power of Prime Minister Theresa May’s administration.  The kneejerk reaction in the Pound was to the upside as the decision could prevent an exit altogether if MPs from the House of Commons fail to find a majority in favor of exiting.  Helping the Pound appreciate further versus peers was the subsequent decision from the Bank of England to maintain interest rates at 0.25% while removing language related to forward guidance for interest rates.  With no further rate cuts forecast at this time, the Pound has further room to appreciate over the near-term.

For the first time in nearly 2-years, US factory orders rose on an annualized basis, climbing 0.60% from a year earlier.  The monthly figure came in a better than anticipated 0.30% for September while August expansion was revised higher to 0.40%.  These figures coincide with stronger manufacturing activity after both Markit and ISM released better than anticipated PMI results earlier in the week.  However, despite the industrial recovery, the pace of services activity has tapered moderately, with the ISM non-manufacturing PMI slipping to 54.8 during October from 57.1 in September.  The employment component of the PMI decelerated notably, potentially foreshadowing hiring challenges ahead of the nonfarm payroll figure due later in the session from the Bureau of Labor Statistics.  In the meantime, softness in the US dollar has seen precious metals remain elevated, with gold prices retaking the $1300.00 per troy ounce level.