Unconditional extension of Brexit until April 12

Summary:

• The EU approved a request of the UK to extend the date when the latter will leave the block
• Two dates are on the table - both of them fall before the EP elections
• Japanese inflation comes below expectations, Japan’s 10Y yield declines to the lowest since November 2016

Brexit extension approved

After numerous hours of negotiations the EU-27 countries approved unanimously a Brexit extension at least until April 12 on the condition that PM Theresa May will be able to get her agreement through the UK Parliament next week. If she fails to do so, then the UK will leave the EU on May 22 without any agreement. These are quite clear rules set by the EU, however, the UK government will be permitted to seek a longer extension (it means beyond the two dates presented here) if it can come up with a plan and agree the participate in the upcoming European Parliament elections, as The Guardian reports. Europen Council President Donald Tusk underlined that the withdrawal agreement cannot be renegotiated, hence any unilateral statement must be in line with this agreement. We have yet to be offered a date when the UK Parliament votes the May’s deal. However, having in mind that her accord has been already rejected twice one may doubt if she is able to convince MPs to finally back her. On the other hand, the circumstances have changed recently and MPs might be aware of a hard Brexit scenario if they reject the May’s agreement once again. It is worth noting that Theresa May is unlikely to seek a longer extension. In turn, the Labour Party leader Jeremy Corbyn has not ruled out revoking the Article 50. Thus, the Labour could continue working on an alternative deal to leave the block. It looks like Brexit chaos will last a bit longer but it does not mean the likelihood of a hard Brexit has diminished.

The pound plunged on Thursday on the back of a hard Brexit threat as well as the strong US dollar. The GBPUSD managed to stay above 1.2990 and then it came back above 1.31. The major resistance is placed at around 1.33. Source: xStation5

Japan’s inflation disappoints (over and over again)

The bag of inflation data from the Japanese economy disappointed as price growth failed to speed up in February. Annual headline inflation stayed at 0.2% falling short of the median estimate of a 0.3% increase. Core gauges also came below expectations - the ex-fresh food gauge declined to 0.7% from 0.8% while the ex-fresh food and energy (the super core inflation comparable to other countries’ core measures) held at 0.4%. The revised Fed’s stance in conjunction with still subdued price pressured pushed the Japan’s 10Y yield to -0.065% over the Asian session, the lowest since November 2016. The yen did not move too much over Asian hours trading and it is trading quite flat at the time of writing.

The USDJPY is hovering in the middle of a range between 108 and 114.3. Note that the lower end of this range is also supported by the orange trend line. Source: xStation5

In the other news:

• New Zealand’s 10Y yield slipped below 2% for the first time ever, the main rate is set at 1.75%