The pound rallied on Friday after suffering it’s biggest one day fall of the year the previous day. Sterling gained strength due to EU leaders agreeing to give Theresa May a two-week reprieve, giving her extra time to find a solution to leaving the European Union. The EU have also left the door open to the possibility of a much longer extension to Article 50.
Theresa May will try for the third time to get her deal through Parliament this week, which is once again widely expected to fail. Whilst the first thought may be that this points towards a no deal Brexit and would be detrimental to the pound, actually there is a very distinct possibility that the deal being shut down again could give the pound a boost. Should the deal fall flat again this would increase the odds of Brexit being abandoned or stopped by a second referendum, which would be Sterling positive.
The week ahead
£ - Although a definite date hasn’t been set yet, the third parliamentary vote on the Brexit withdrawal agreement will take place this week. Should this surprise and be accepted through Parliament, we will leave the EU on May 22nd with a deal. As mentioned previously though, it is expected that this will once again get voted down. The government must notify the EU of how they intend to progress by April 12th. A Gross Domestic Product (GDP) estimate released on Friday is the main piece of hard data that could affect the pound this week, should the figures deviate from the expected outcome.
€ - The Ifo business sentiment survey out this morning from Germany will be the key release of the week for the single currency. This is a leading indicator of current economic conditions. It is expected to show a rise from the previous reading which could lend the Euro some support early on this morning. A speech from ECB President Mario Draghi on Wednesday and an estimate of German inflation on Thursday will both also be closely scrutinised.
$ - The main release of the week for the greenback will be fourth quarter GDP growth, out on Thursday. This reading is expected to fall slightly from the previous release, which could hint towards a weaker dollar. New home sales numbers and personal income figures out towards the end of the week could also have a bearing on USD rates this week.