Today, Theresa May will be formally asking the EU for permission to extend Article 50, following a failure to agree a deal with Parliament. Although PM May remains insistent it will only be a short delay, a few months, entering a new period of uncertainty has triggered caution from investors. This has hit the markets and seen the pound lose some of its recently found strength, falling as low as 1.1644 against the euro and 1.3213 against the US dollar.
Tomorrow, leaders from across the Eurozone will be meeting at the EU Economic summit to discuss Brexit progress and to vote on allowing the Article 50 extension. Although the extension is widely believed to be agreed upon, there are reports that the EU may try to tag on some caveats which could add to the current level of uncertainty and further weaken the pound. With the deadline, March 29th, rapidly approaching the government will be counting on the extension to prevent the “worst case” no-deal scenario after May’s deal was not allowed back in Parliament unless “significant” changes are made.
On the data calendar for today, UK inflation data was released at 9.30 GMT. CPI data rose from 1.8% to 1.9% while RPI remained level at 2.5%. As inflation is tied to interest rates, above forecast data is usually good for the pound, however the Brexit shadow has led to a muted response. From the US, the main event will be the FOMC press conference at 6.30 GMT, following on from economic projections and interest rate announcement at 6.00 GMT. Although the interest rates are forecast to remain at 2.25% - 2.50%, any hints towards the timing of future rate rises during the press conference will be a source of volatility in the dollar.