Following the pounds biggest one day losses of the year yesterday, some ground was recovered overnight after EU leaders granted an extension to Article 50 until May 22nd. The extension is to give the UK more time to decide how it will exit the European Union. Although the latest move from the EU reduces the imminent risk of no deal next week, the extension is conditional on approval of Theresa May’s deal, which has been defeated in Parliament twice before.
Failing parliamentary approval, the deadline will be April 12th, where the UK will face a much longer delay where the options would be no deal, or to provide an alternative plan which could involve a general election or second referendum. Yesterday saw cable plunge down to 1.3021, recovering to 1.3150 and a low of 1.1475 against the euro, recovering to 1.1635. It is likely the volatility will continue over the next few days amid uncertainty in the build up to a third parliamentary vote on PM May’s deal.
This morning on the data front, flash manufacturing and service PMI’s were released for the Eurozone. While services came out as forecast at 52.7, manufacturing fell short of the forecast 49.5 at 47.6 signalling a slow down for the sector. For the UK the Bank of England’s quarterly bulletin will be announced at mid-day, containing commentary on market conditions and monetary policy. From across the pond the US dollar will have flash manufacturing and services PMI’s released at 1.45 GMT.