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FTSE mixed, as Supreme Court decides
Hopes that the UK’s Supreme Court would buff UK Prime Minister Theresa May’s nails sent the FTSE futures and the pound higher in Asia. Nonetheless, scepticism could be back as decision time approaches.

The FTSE 100 stocks were driven higher at the London open, as the mining shares rallied. Rio Tinto (+2.40%), BHP Billiton (+2.78%) and Glencore (+2.01%) pulled the UK’s index higher, while energy stocks (+0.73%) and financials (+0.31%) joined the early gainers. The enthusiasm remained short-lived however, as Brexit fears shadowed the early enthusiasm.

‘The powers that be’

Today is a critical day for the UK PM Theresa May, as the UK’s Supreme Court will decide on whether she will be given the power to trigger Article 50. According to the Guardian, ‘lawmakers told her that any desire to push through a short piece of legislation could leave the government open to legal appeals’. Also, negotiations with non-EU countries could, at this stage, be considered as illegal.

The pound’s value is inversely proportional to the power Theresa May will be given in making the most critical Brexit decisions.

Less power May has, Stronger the pound will be.

The GBPUSD extended gains to a five-week high, 1.2545, ahead of today’s critical court decision. An important technical resistance is eyed at 1.2575 (minor 23.6% retracement on post-Brexit sell-off), if surpassed, could pave the way for a further rise towards 1.2774 (Dec 5th peak). On the downside, buyers are presumed at 1.2415/1.2400 (100 and 50-day moving averages respectively).

Traders buy the yen, sell the dollar as Trump walks away from the TPP

The change in US trade policy has officially kicked off, as US President Donald Trump signed an executive order to walk away from the Trans-Pacific Partnership (TPP) agreement.

The Nikkei (-0.55%) and Topix (-0.55%) were offered, as the Japanese carmakers and electric integrated utilities sold off the most in Tokyo. Toyota Motor (-1.66%) and Honda Motor (-1.66%) were among the leading losers.

The USDJPY extended weakness to 102.53 in Tokyo. Negative trend and momentum indicators hint at a potential test of the critical mid-term level of 111.95 (major 38.2% retracement on Nov 8th to Dec 14th Trump rally). Breaking below this support would suggest a mid-term bearish reversal and bring the 110.00 level back on the radar. Resistance is seen at 115.00/115.45 (optionality / moving average).

As an immediate reaction to the US break-up, Australia and New Zealand pledged to consolidate the TPP after the US exit.

On Friday, Donald Trump will meet UK PM Theresa May. The two leaders will likely negotiate and start shaping the US-UK relationship in the new era of rising protectionism.

Moving forward, Donald Trump should quickly move to renegotiate the North American Free Trade Agreement (NAFTA) and the Regional Comprehensive Economic Partnership (RCEP) with China.

Investors hold back as Trump demolishes trade deals

The unwinding of the Trump reflation trades led the US dollar and the US stocks globally lower. The lack of clarity regarding Trump’s plans is weighing on investors’ confidence. The Dow Jones (-0.14%) and S&P500 (-0.27%) stocks closed lower in New York yesterday. The US 10-year yields consolidated below the 2.40% after having tested 2.60% in December. The Trump-euphoria is paused until there is more clarity regarding where the US may be heading in terms of its fiscal and trade policies. US stocks are set for a range-bound open.

Technical view: EURUSD steps in the mid-term bullish consolidation zone

The EURUSD stepped in the mid-term bullish consolidation zone after clearing the critical 1.0707/10715 resistance zone. Solid PMI data could give an extra hand to the EUR-bulls and help the EURUSD consolidate gains above the 100-day moving average, 1.0765. The next technical level stands at 1.0819 (Fibonacci’s 50% level on post-Trump decline).

Lira holders demand higher rates as the Central Bank of Turkey meets today

In Turkey, the central bank’s rate decision will be closely monitored. The Central Bank of Turkey (CBT) is expected to raise rates to cover the risks of holding the lira. We remind that the lira is subject to rising social unrest regarding the constitutional referendum and political uncertainties. The risk of insufficient intervention could trigger a fresh wave of sell-off in the lira denominated markets, while satisfactory rate action would pull the USDTRY below 2.70. Analysts expect a 50 basis points rise in the benchmark repurchase rate, a 75 basis points hike in the overnight lending rate and a 25 basis points hike in the overnight borrowing rate.