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UK waits on EU extension decision

UK waits on EU extension decision

 

GBP

Political uncertainty continued to dominate markets yesterday, especially with a lack of major data releases and a relatively calm global market. Prime Minister Boris Johnson stated that he was waiting for the EU’s response to the Brexit extension request before making his next move. There are still expectations that the government will push for a General Election in the event of a 3-month extension, although there was also speculation of a new parliamentary timetable to approve Brexit legislation. There were reports that the UK PM had asked French President Macron to block an extension beyond November 15th, as uncertainty dominated with the EU likely to make a decision on Friday. 

Overall volatility subsided as markets waited for fresh developments with the Pound. After finding support below 1.2850 against the Dollar there was a recovery to above 1.2900 while against the Euro, Sterling consolidated around 1.1590. Political uncertainty will continue to dominate today with GBP holding steady as we begin Thursday’s European trading session.

 

USD

The Dollar against the Euro retreated to lows just above 1.1100 early in US trading as the dollar gained some traction. There were no major US data releases during the day as the countdown to next week’s Federal Reserve (Fed) policy meeting continued.

The US currency failed to hold its best levels and the Euro settled around 1.1125 as narrow ranges continued to prevail before a small advance at Thursday’s European open.  US PMI data will be watched closely following relatively weak manufacturing and services data for September. 

 

EUR

The common currency has managed to leave behind the pessimism seen at the beginning of the week and prompted the Euro to rebound from the boundaries of the 1.1100 handle to the current 1.1130 figure against the Dollar. The pair are now adding to Wednesday’s recovery amidst some loss of upside traction in the Dollar and absent updates on the US-China trade front and the Brexit process. Both remaining as key drivers of the broad risk appetite trends in the past few weeks. 

Throughout the morning, the upbeat momentum in the Euro will be put to the test in light of the release of advanced PMIs in core Euroland ahead of the ECB event in the afternoon. Regarding the latter, it will be ECB’s President Draghi’s last meeting and consensus among investors have been leaning towards a dovish message from the Council. If so, this will be seen as reiterating the negative outlook on the economy and the need for further monetary stimulus.

 

Data to watch

08.15 EUR – French Flash Services PMI

08.30 EUR – German Flash ManufacturingPMI

08.30 EUR – German Flash Services PMI

12.45 EUR – ECB Monetary Policy Statement

13.30 EUR – ECB Press Conference

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