Summary:
- UK PM to ask for 3-month extension to Article 50 deadline
- EU summit begins tomorrow
- Mixed messages from inflation data
Reports suggest that Theresa May is to seek a short delay to Brexit later on today, as the PM will send a letter to the EU ahead of the summit which begins tomorrow. After MPs rejected both May’s withdrawal agreement and a no-deal Brexit last week, it was readily apparent that an extension beyond 29th March was necessary, but many had hoped for a longer extension to pursue a different route. The move by the PM seems to represent her doggedly sticking to her plan in the hope that parliament will change course and accept it. There are already stories doing the rounds that parliament will attempt to take control of the extension length, but even if they do, it’s far from a given that they could form a majority behind an alternative route to Brexit.
GBPUSD remains fairly well support around the 38.2-41.4% fib region from 1.3220-1.3208 for now but is susceptible to sharp moves on any Brexit news. Also keep in mind the USD side of this pair will be highly sensitive to the Fed decision later. Source: xStation
The ball is now in the EU’s court, with the bloc still likely to approve a short extension despite preferring a longer one and the resultant different approach that it would require. The length of the short extension is believed to be 3 months which would push the deadline back to June 30th. This would be favourable in the sense that it would mean the UK wouldn’t have to participate in the EU elections, but if the government is unwilling to change tack then it’s hard to see it being anything other than a delaying tactic which prolongs uncertainty and ultimately will still just see the PM trying to bludgeon MPs into submission for her deal.
Mixed messages from latest UK inflation data
The most recent look at price pressure in the UK has sent slightly conflicting messages with an unexpected rise in the headline CPI figure being offset by a surprise drop in the core reading. If anything the small decline in the core is more telling, but on the whole there’s not really much doing here. While the data relates to the month after yesterday's impressive wage figures, it still suggests that wage increases are running comfortably above inflation, with the current run of real earnings growth showing little sign of ending anytime soon. The pound remains close to its lowest level of the day after the release, but the reaction to the data has been fairly muted to be honest, with the softness coming more from the latest on Brexit.
UK CPI may have ticked higher in the most recent release, but overall this metric appears to be still easing after the spike seen in 2017. Both the headline and core readings are now below the BoE 2% inflation target. Source: XTB Macrobond
