The pound rallied as chances of a delay to Britain’s exit from the EU became more likely. With PM Theresa May facing an uphill battle to get her deal passed by a divided parliament, it is becoming more likely the extension in time to gain concessions from Brussels will be needed to avoid a no deal scenario. As the 29th of March looms closer, more MP’s are looking for options to force an extension to Article 50. Due to this the pound reached highs of 1.1534 and 1.3093 against the euro and US dollar respectively.
The week ahead:
Brexit will remain the focal point for the pound once again, with the Prime minister making a statement to parliament on Tuesday, followed by a debate on Wednesday. The Cooper/Letwin amendment will be one to watch out for, which if passed would require the government to request an extension if a deal is not agreed before the 13th of March. For hard data releases manufacturing PMI’s for February will be released on Friday at 10.30 GMT.
For the euro, the key release will be flash inflation data for February due at 11.00 on Friday. Inflation is due to rise from 1.4% to 1.5%. Although the European Central Bank has said it will not consider rising interest rates until after summer, higher than forecast inflation data will still have a positive impact for the single currency. The other key release for the Eurozone will be manufacturing PMI’s for a host of European countries due out on Friday, released from 8.45 GMT.
The US dollar is in for a busy week. On Tuesday and Wednesday Federal Reserve chair, Jerome Powell, will be giving testimony on the semi-annual monetary policy report. Investors will listen closely for hints on future monetary policy and comments on the economic outlook. Advance GDP data will be released on Thursday, the release of this data has been delayed by 28 days due to the Government shutdown. On Friday ISM manufacturing PMI will be released at 3.00 GMT, forecast for a fall by 0.6 any variation could create dollar volatility.