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Pound Up As EU Court Aide Says UK Can Unilaterally Revoke Article 50, PMI Rises

The pound drifted higher against its key counterparts in the European session on Tuesday, after a senior EU law officer said the U.K. could halt Brexit by unilaterally revoking Article 50 and as a data showed that U.K. construction activity expanded at the fastest pace in four months in November.

Survey data from IHS Markit showed that U.K. construction PMI rose in November to the highest since July.

The construction Purchasing Managers' Index climbed to 53.4 from 53.2 in October. Economists had forecast a score of 52.5.

A leading European legal official said that the U.K. can still halt Brexit by revoking Article 50 without the consent of other EU member states.

The advocate general said Article 50 of the Libson Treaty allows the "unilateral revocation of the notification of the intention to withdraw from the European Union, until such time as the Withdrawal Agreement is formally concluded."

The Bank of England governor Mark Carney suggested that the probability of the occurrence of a disorderly Brexit is very low.

"Tail risk is tail risk, it's low probability. And MPs on the committee probably have a better idea about how Brexit will play out," Carney told Treasury Committee.

The pound declined against its most major counterparts in the Asian session amid rising risk aversion, as the initial euphoria over the U.S.-China truce on import tariffs subsided and investors wondered if a 90-day tariff truce was enough for the two countries to resolve their differences on a range of issues.

The pound added 0.9 percent to hit a 5-day high of 1.2840 against the dollar, from a low of 1.2720 hit at 7:45 pm ET. The pair was valued at 1.2723 when it closed deals on Monday. Continuation of the pound's uptrend may take it to a resistance around the 1.30 level.

Having fallen to near a 5-week low of 143.93 against the yen at 3:00 am ET, the pound reversed direction and bounced off to 144.76. At yesterday's close, the pair was worth 144.59. Next key resistance for the pound is seen around the 147.00 region.

Data from the Bank of Japan showed that Japan monetary base rose 6.1 percent on year in November, coming in at 501.330 trillion yen. That follows two straight months of 5.9 percent gains.

Following more than a 2-month low of 1.2673 hit at 3:00 am ET, the pound moved up to 1.2757 against the franc. The pound-franc pair finished Monday's trading at 1.2693. The pound is seen finding resistance around the 1.29 mark.

Figures from the Federal Statistical Office showed that Switzerland's consumer price inflation slowed more-than-expected in November to its weakest level in seven months.

The consumer price index rose 0.9 percent year-on-year following a 1.1 percent increase in October. Economists had forecast 1 percent inflation.

The pound was trading higher at 0.8895 against the euro, up from a 2-1/2-month low of 0.8945 seen at 3:00 am ET. The pair closed yesterday's deals at 0.8921. The U.K. currency is poised to challenge resistance around the 0.86 mark.

Figures from Eurostat showed that Eurozone producer price inflation accelerated further in October, defying expectations.

Producer prices rose 4.9 percent year-on-year after a revised 4.6 percent in September. Economists had expected the rate to remain unchanged at September's original figure of 4.5 percent.

Looking ahead, at 10:00 am ET, Federal Reserve Bank of New York President John Williams will give a press conference about local employment and labor force trends at the Federal Reserve Bank of New York.

Bank of England member Gertjan Vlieghe will speak at the Plymouth Manufacturing Group Annual Christmas Lecture in England at 1:00 pm ET.

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