Low currency volatility, partly a by-product of major central bank monetary policy being in stasis, has been a recurring theme in recent months. However, major crosses have in the past few sessions bounced around.
Sterling, which had weakened sharply yesterday as markets re-priced the risk of a hard Brexit, today rebounded. GBP/USD had yesterday threatened to break through 1.30 is now back to 1.32. While the European Council has agreed to grant the UK a time extension to Article 50, we are arguably no nearer to knowing if or when the UK will leave the EU and under what conditions.
The move against the Euro has been even more acute, with GBP/EUR surging back to 1.17 from 1.145 yesterday afternoon. The Euro has given back in the past two sessions a third of the gains it had made since 8 March. Weak Eurozone composite PMI data for March of 51.3 suggest that any recovery in GDP growth in Q1 (from a lacklustre 0.2% qoq in Q4 2018) was tepid at best and the prospect of an ECB rate hike this year, which was already very low, has diminished further.
