Scotland, Brexit, Fed,US

Scotland is "flirting again with secession". The likelihood that Scotland would hold a second Scottish independence referendum might have seemed fairly remote one month ago but the idea of a Scottish devolution from the UK is being discussed again.
Just two weeks ago (On February 13) I wrote a sceptical piece about Brexit.
"Nationalism, regionalisms, tribalism. Will we see the UK independence from the EU soon, then Scotland's independence from the UK later, Catalonia independence from Spain? This could be a can of worms."

Meanwhile, on the foreign exchange market pound sterling was dumped in Asia overnight and the selling has continued in Europe (as I write this piece).
It is widely being reported in the mainstream that UK Prime Minister Theresa May's team was preparing for Scotland to potentially call for an independence referendum in March.
Bloomberg reports unidentified government sources stating that "May could agree to a new Scottish vote, but on condition, it is held after the UK leaves the European Union,"
www.bloomberg.com/news/articles/2017-02-27/pound-falls-as-may-said-to-prepare-for-new-scottish-referendum

Pound Drops as May Reported to Brace for New Scottish Referendum

www.bloomberg.com

The pound fell against all its major peers after The Times reported that U.K. Prime Minister Theresa May's team is preparing for Scotland to potentially call for an independence referendum.

Recently the House of Commons approved the bill (article 50) which would authorise May to trigger the nation's withdrawal from the bloc.

The House of Lords (upper house) is currently examining (debating) the bill (as I write this piece). What's more, if the Lords recommend amendments to the bill the House of Commons (lower house) would be required to consider those amendments. In other words, this could be a strategy to delay (frustrate) article 50 becoming law. Put another way the bill could bounce back and forth like a ping-pong ball and while peers in the House of Lords and MP in the House of Commons debate the bill the UK still remains in the EU.
So a delaying strategy could be playing out which might be prudent for forex traders to keep in mind.
Moreover, the House of Lords could even overrule article 50, bearing in mind that the UK is a constitutional monarchy. The sovereign head of state (Queen or King on the throne) can overrule a bill passed by the House of Commons if it is deemed not to be in the national interest (but this has not happened for several hundred years). In a few words, it might be just too politically sensitive for the upper and lower houses of parliament to clash.

So my two cents worth is that the peers are likely to deploy a delaying strategy.
Think about it.Do you really think the UK establishment want their nation, the union jack (first introduced in 1606), to dissolve?

Across the pond, the Dow has managed to remain in positive territory for the eleventh day in a row. However, it was not a convincing close, bearing in mind that the Dow spent all but the last 5 minutes of the entire session in negative territory.
Nonetheless, it was still the longest winning run since 1992 as investors looked ahead to tomorrow's speech by President Trump to a joint session of Congress.

For approximately one month now markets have been awaiting further details on the so-called "phenomenal" tax plan that the President promised us on the 9th February when he was at a meeting of airline executives.
This statement helped push the Dow conclusively through the 20,000 and up another 3% at a time when the Trump trade was losing its lustre.
We've seen similar signs of weakness in the past few days, which weren't helped by comments last week by new Treasury Secretary Steve Mnuchin when he stated that any tax changes might take several months to outline, let alone implement.

However, the USD has managed to finish the week in positive territory despite a decline in yields which was starting to weigh on the USD.
Market participants are now betting on the next Fed rate rise in May or June rather than March
The decline in yields combined with some level of risk aversion due to political uncertainty in Europe has helped push gold prices to their highest levels in 4 months.
The weakness in yields is also preventing the euro with the spread between US and German yields at their widest in one and half years, despite German inflation being only slightly less than US inflation.
Concerns about political risk in Europe, particularly in France have driven German 2 year yields to a surreal -0.95%. But with German inflation currently at 2%, that means a real yield of -3%. This is likely to wreak havoc on pension funds.

Regarding macro data US January core durable goods orders are expected to come in at 0.5%, unchanged from December.
Moreover, standby for some hawkish talk from the Dallas Fed President and new FOMC voting member Robert Kaplan, when he speaks later today in Oklahoma. Kaplan has been fairly vocal in recent comments about the need to act fairly soon raising the prospect that he could vote for a hike in March even if the wider committee does not.