Global Themes

  • EU to grant Brexit delay
  • Key UK data dump
  • Euro rally to stall after ECB?

GBP

EU to grant Brexit delay

The European Union (EU) is expected to approve a Brexit extension today in the emergency summit but the question remains for how long? British Prime Minister Theresa May travelled to Berlin and Paris yesterday ahead of the summit to speak with Angela Merkel and Emmanuel Macron. Ms May visit was to ask for backing to allow her to put off the departure date to June 30th from the current deadline of this Friday, April 12th. However, The EU would rather a "flextension" until the end of the year or until March 2020, an EU diplomat said. Such an option would allow Britain to leave earlier if the Brexit deadlock in parliament could be broken (source: Reuters).

The deadlock in British parliament still remains strong with no breakthrough in sight. After yesterday’s round of talks the Labour Party said it had not yet seen a clear shift in May's stance. With the risk of a no deal still looming, the IMF has warned the British economy would be hit seven times harder than the rest of the EU and fall into recession if a no deal Brexit took place. The IMF has also forecasted that if a no deal Brexit didn’t result in border disruption, the economy would contract in 2019 and 2020, and after a recovery in 2021, the economy would be 3.5% smaller than if there would’ve been a softer Brexit.

  •  Despite the ongoing Brexit chaos, Sterling still holds strong levels against both the Euro and US Dollar. GBP/EUR broke back into the €1.16 level this morning, while GBP/USD holds firmly above the $1.30 level. Confirmation of a longer Brexit extension could see Sterling make gains against its peers.

Key UK data dump

The UK GDP figure for the first quarter of 2019 will drop in at 9:30am today. Following the UK’s headline services PMI figure falling below 50.0 in March, signifying contraction in Britain’s most dominant sector, GDP is at risk of surprising negatively today. Consensus forecast is to see Q1 GDP grow 1.7% compared to 1.4% y/y.

  • Also on the radar this morning is manufacturing and industrial output, both of which are expected to have slowed month on month. The UK economy continues to suffer amidst Brexit uncertainty and this morning’s data could shed more light into the extent of this deterioration and weigh on Sterling. On the flip side, should the data surprise to the upside, this will give a welcome boost to Sterling. Nevertheless, any jolt in the value of the pound may be short-lived given its sensitivity to Brexit-related news, which dominates the pound’s trading sentiment.

EUR

Euro rally to stall after ECB?

The European Central Bank (ECB) holds its monetary policy meeting today and releases its rate decision at 12:45pm. No changes to policy are expected but ECB President Mario Draghi will be holding a press conference at 1:30pm to follow.?

What can be expected and how will the Euro react? No clear guidance is expected at this meeting, but with Mr Draghi holding a press conference afterwards, traders will remain on their toes for any hints or clues as to how the bank intends to support the waning Eurozone economy. The recent uplift in EUR/USD could soon run out of steam and the heavy resistance around the $1.1340 area could prove a difficult hurdle to overcome.

  •  This week, the Euro has risen sharply from the doldrums of $1.12 to test the $1.13 level against the US Dollar. However, all eyes will be on the ECB meeting today for further clues on interest rates and economic stimulus measures to drive Euro sentiment. Due to the high level of global uncertainty surrounding the global economic outlook and amid some worrying data from the Eurozone over the past few months, the ECB downgraded its growth and inflation forecasts at its last meeting in March. Additionally, the central bank advised interest rates will remain at record low levels for the duration of 2019.

*The rates displayed by our free currency converter are neither "buy" nor "sell" rates, but interbank rates, the wholesale exchange rates between banks. Interbank rates don’t include the spreads, handling fees, and other charges that may be assessed by foreign exchange providers. Please note that, as such, these rates are provided for indicative purposes only. Prior to booking a transaction, Western Union Business Solutions will advise you of the actual rate then available for a particular currency transaction.

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