EU to be Tough on Brexit Extension

April 8, 2019 — 3 min read

The pound ended last week largely unchanged, having traded within a two cent range. The ebb and flow of Brexit headlines continues to drive the direction of the pound, resulting in choppy trade for the UK unit.

Over the weekend, reports surfaced that Theresa May has held her ground in talks with Jeremy Corbyn, however with the deadline looming there are those who are starting to suggest she may give in on a customs union.

The pound is holding firm at the start of trade for the week but looks vulnerable to any negative statements from the EU on the Brexit extension. The focus for this week will be the ongoing talks between the PM and leader of the opposition.

Euro

The EU had another week of slowing/concerning economic data. The year-on-year inflation rate estimate saw inflation dropping to 1.4% from a previous reading of 1.6% and the market expecting 1.5%. The minutes of the ECB’s last meeting were much the same in sentiment, in that they cited muted inflation, concerns over global growth and trade protectionism.

French President, Emanuel Macron, made some tough comments on the Brexit situation over the weekend saying, the EU can’t live with this perpetual Brexit cycle and insist the EU should put some tough political conditions on any further extension being granted.

US Dollar

The global growth concerns and trade war continued last week which saw the US dollar stable with a gloomy outlook. Talks between the US and China seem to have taken a turn for the worst with any resolution looking far off. On the data front this was confirmed with retail sales shrinking by 0.2% month on month, durable goods shrinking by 1.6% and the services sector missing the markets expectations for the month. The focus for this week will be the inflation number due on Wednesday, this is expected to have shown a strong climb to 1.8% from the previous disappointing 1.5%.

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