Price action in currency markets remains reasonably subdued ahead of tomorrow’s Federal Reserve policy meeting. The Dollar has been edging lower on expectations that FOMC members will further tone down their expectations for rate hikes in 2019 and 2020. The EUR/USD cross has crawled higher to 1.135 – its highest level in a fortnight.
Sterling has been treading water against both the Dollar and the Euro, despite some strong UK labour market data for January. Prime Minister Theresa May will reportedly seek a 3-month extension to Article 50 from the EU, with an option for a longer extension, when she meets EU leaders on Thursday. This in turn raises three questions – whether the EU Council will grant a time extension, the duration of this extension and importantly what conditions it will apply to such an extension.
Prime Minister May ideally would like to hold a third parliamentary vote on her draft Brexit deal (which if approved would require a short time-extension) but the speaker of the house, John Bercow, has said he would not allow such a third vote to be held. The Brexit process is seemingly a complex equation with currently no clear-cut solution.
