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Sterling drops as EU pushes back on short extension request

21st March 2019 Market Update

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🇬🇧 GBP – The pound was once again a hostage to political uncertainty following the PM’s request to extend article 50 to 30th June. Sterling dropped across the board as the feeling in the market now seems to be that without the backing of parliament then the request may well be meaningless. EC President Donald Tusk seemed to back this by stating that he believed the EU would sign off on the short extension but only if May’s deal can be signed off by MP’s next week. He also stated that an emergency EU summit could be held next week if needed.

Mrs May will be flying to Brussels today to try and persuade the other 27 countries to support the short extension.

Away from Brexit, UK inflation rose to 1.9% in February as the cost of food offset a decline in clothes prices.

Focus today will be on retail sales figures this morning at 9.30am expected to come in lower at 3.3% and then we have the Bank of England with its interest rate decision as well as the release of the minutes from its latest meeting. No real change expected from the bank and the pound will continue to be at the mercy of any news from Brussels.

🇪🇺 EUR – The single bloc currency benefited from flows out of the US dollar following the very dovish interest rate outlook by the Federal Reserve. The euro hit a six-week high versus the US dollar last night.

No major news flows expected today.

🇺🇸 USD – The dollar dropped in the evening following a more dovish approach to monetary policy than expected. Whilst the Fed elected to hold rates at 2.5%, they predicted no further rates rises now until 2020. The news will no doubt please Donald Trump who has openly criticised the Fed for their stance on monetary policy.

No major news today from the states.

 

Summary:
GBP: PM wants short extension to Article 50
EUR: Euro benefits from dovish Fed rate statement
USD: No rate rise until 2020, predicted by the Fed

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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