There was a lot of noise and news last week but once again price action in the Euro and Australian Dollar was very limited and the Dollar was broadly unchanged in trade-weighted terms. Moreover, the rallies in the Swiss Franc and Kiwi Dollars were modest while Sterling’s small sell-off kept the currency within recent ranges. Markets are seemingly waiting for more explicit changes in major central bank monetary policies while at the same time trying to make sense of the increasingly confused and uncertain Brexit situation.
Sterling
Sterling remains volatile, beating to the Brexit tune while largely ignoring macro data. Sterling weakened about 0.5% last week in trade-weighted terms but remained within its narrow one-month range. There are still far more questions than answers with regards to whether, when and under what terms and conditions the UK will leave the EU.
At the request of Prime Minister Theresa May, the European Council agreed on 21st March to a conditional extension of Article 50 beyond 29th March. Should the House of Commons vote in favour of May’s draft Brexit deal by 12th April, the British government would have until 22nd May to pass the decision into law. However, if the House of Commons fails to approve the deal in its third attempt, the British government would have until 12th April to present its next step to the European Council. If the government failed to do so or if the European Council rejected the government’s proposed plan, the UK would in all likelihood leave the EU without a deal in place.
The added complication is that it is unclear whether the Speaker of the House of Commons will allow a third parliamentary vote, let alone whether a majority of MPs would vote in favour (having rejected the deal with large majorities in the previous two votes). Moreover, Theresa May has come under growing pressure to announce when she would step down.
