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Forex News: Pound Declines As U.K. Government Loses Brexit Case

Pound Declines As U.K. Government Loses Brexit Case

01/24/2017 - 06:31:00 (RTTNews)

(RTTNews) - The pound dropped against its major counterparts in the early European session on Tuesday, after the U.K. government lost the historic battle over the Brexit process, as the Supreme court ruled that Article 50 can be triggered only with the approval of the Parliament.

By a majority vote of eight to three, the Supreme court ruled that "the Government cannot trigger Article 50 without an Act of Parliament authorising it to do so."

Rejecting the Prime Minister's contention that she could use "royal prerogative" powers to trigger the proceedings, the court said that "any change in the law to give effect to the referendum must be made in the only way permitted by the UK constitution, namely by an Act of Parliament."

Data from the Office for National Statistics showed that the U.K. budget deficit narrowed at the end of the year.

Public sector net borrowing, excluding public sector banks, decreased by GBP 0.4 billion from prior year to GBP 6.9 billion in December. The expected level of budget deficit was GBP 6.7 billion.

The pound has been trading slightly lower against its major rivals in the Asian session, with the exception of the greenback.

The pound slipped to 1.2436 against the greenback, from near a 6-week high of 1.2545 hit at 5:00 pm ET. The next possible support for the pound-greenback pair is likely seen around the 1.23 zone.

The pound reversed from its previous near 3-week high of 1.2532 against the Swiss franc, edging down to 1.2437. Continuation of the pound's downtrend may see it challenging support around the 1.22 mark.

The pound dropped to 140.94 against the yen, from its early session's high of 142.08. Further downtrend may take the pound to a support around the 139.00 region.

The latest survey from Nikkei showed that Japan's manufacturing sector activity continued to expand at a faster pace in January, with a PMI score of 52.8.

Now at a 34-month high, the January reading is up from 52.4 in December.

The pound, having advanced to near a 3-week high of 0.8565 versus the euro at 4:35 am ET, reversed direction and fell to 0.8633 in a short while. The pound is seen finding support around the 0.88 level.

Flash survey data from IHS Markit showed that the euro area private sector continued to maintain a robust pace of expansion in January.

The composite output index fell slightly to 54.3 in January from 54.4 in December. Economists had expected the index to rise to 54.5.

Looking ahead, Markit's U.S. flash manufacturing PMI for January and existing home sales for December are due in the New York session.

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