Hold on to your hats, we're in for a bumpy ride...

The pound has drifted lower overnight after PM Theresa May addressed the nation, saying “MP’s had done everything possible to avoid agreeing a deal”. The PM looked tired and one could say beaten as she explained the current Brexit situation to the country. She spelled out the three current scenarios – her deal with an extension, a ‘no deal’ Brexit or no Brexit at all.

UK

The Prime Minister will now head to Brussels to try and convince the EU that an extension is the right thing to do and then on Monday will again attempt to hold a meaningful vote in the house of commons. However, after it has been comprehensively beaten twice before, it looks unlikely the deal will be passed.

This leaves only a ‘no deal Brexit’ or no Brexit at all.

Hold onto your hats, we are in for a bumpy ride! On the data front we had inflation numbers for February largely in line with expectations – CPI being printed at 1.9%, 0.1% above expectations while core inflation missed the forecast of 1.9% by 0.1%.

Today, we have the Bank of England’s Interest Rate decision, however with the current Brexit situation we can expect the MPC to make it clear that they will be ‘sitting on their hands’ until some outcome has materialised. Accordingly, the direction for the Pound looks set to be driven by Headlines in the session ahead.

Euro

The Euro continues to hold its ground against both the pound and US Dollar. The single currency has made solid gains against the two currencies as the Pound suffers on Brexit concerns and the Dollar weakens on interest rate outlook.

The EU Council president Donald Tusk made it clear yesterday that an extension to Article 50 is possible should a deal be agreed in the House of Commons on Monday, while the French parliament made it clear that they will not give any further compromises and are still planning for a ‘no deal’ Brexit.

US Dollar

The US Dollar drifted weaker against a basket of currencies overnight – I would think to Donald Trump’s delight – after the Fed FOMC left interest rate unchanged and confirmed they would remain patient in the tightening of monetary policy. The Fed said although unemployment remained strong, economic growth forecasts were not where they need to be. The futures market is now pricing in a 97.9 probability of no rate hike in May when the FOMC meet again and it looks highly unlikely that rates will be hiked in 2019.

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