Mo Brexit, Mo Problems
March 22, 2019
Fortnight. No, not the hit game millennials flocked to play. It is how long the EU leaders gave May to avoid a hard Brexit next Friday. It was decided last night after a horrendously long meeting that the EU would extend the Brexit deadline until April 12. The delay is an attempt by the EU to give May some breathing room and dictate the next stages after it was increasingly apparent that the UK could slip out of the EU without a deal due to complacency. Should May manage to pass her Brexit deal next week, the legal departure date will then be pushed back to May 22 to give the UK time to pass the necessary legislation. However, the debate is still rife whether a third meaningful vote can still be put in front of the House. Should the ratification of May’s deal fail, the EU 27 leaders have drawn a line in the sand and stated the UK must decide on a long extension which includes the EU Parliamentary elections or prepare for a hard Brexit. The can kicking continues, but the news was welcomed by one person especially – sterling. The pound rebounded last night as the news broke after falling for consecutive trading days due to the probability of a no-deal Brexit being incrementally priced in.
The euro fell 0.34% yesterday as the US dollar rebounded. Most of the market’s attention was focused on Brexit developments at the EU 27 summit. Meanwhile, yesterday’s Eurozone data releases saw consumer confidence revised up from -7.4 to -7.2 for March. The euro has started this morning slightly weaker after French manufacturing and service sectors show signs of shrinking as March’s Purchasing Manager Indices fall below the 50 level. The move was far below that expected. German PMIs are released at 08:30 GMT today with the consensus forecast expecting the manufacturing sector to shrink. This is key for today’s euro price action as the Eurozone battles with growth, driven by a slowdown in German production.
The US dollar reversed most of Wednesday’s Fed losses in yesterday’s trading session. Only NOK and CHF managed to make gains against a roaring greenback after the Norges bank hiked interest rates 25 basis points to 1%. The move was mainly driven by a rebound in longer-tenor US treasury yields, which dropped dramatically after the Fed forecast one rate hike by the end of 2020. This afternoon, US Purchasing Manager’s Indices are released for the Manufacturing and Service sectors.
The loonie has been one of the more interesting G10 currencies this week, a theme which will undoubtedly continue today. A flailing US dollar after the Fed meeting seemed ineffective in spurring the loonie higher, so did fresh highs in the crude market. However, a strong US dollar in yesterday’s trading session made easy ground against the loonie. Ultimately, USDCAD rose 0.44% on the day. Today, Retail Sales and CPI are released at 12:30 GMT.