Brexit Forecast & GBP / EUR Weekly Outlook.

Good afternoon everyone.

I hope we all had a nice weekend and are enjoying the never ending story that is Brexit. Another week has gone by and still no agreement within the House of Commons. PM May was trying to push her deal through hoping it would be 3rd time a charm but that now seems dead in the water for this week anyway.

This will actually be my 5th attempt at writing a report since the start of last week and for the 5th time while writing the report major news has unexpectedly been announced. Firstly a quick recap.

Last week the House of Commons rejected the EU Withdrawal Agreement for a second time, and voted to delay Brexit. Chancellor Hammond’s Spring Statement revised down borrowing projections, increasing headroom for potential giveaways later this year. Overall Sterling exchanges rates were all up much higher as markets attached a lower risk to a ‘no deal scenario. However since then sentiment has changed and yesterday afternoon reports suggested talks between the DUP and May have broken down also announced at pretty much the same time was the House of Commons speaker who has ruled against a 3rd meaningful vote until the deal is changed in some way. MP’s raised concerns that they would be voting again on the same deal without any changes to it which led to the Speaker making this announcement without notifying May beforehand. This has now made May’s situation even more difficult.

@ 14:50pm today from Bloomberg……

EU officials are said to have made the following comments….

  • Extension offer unlikely to be finalised at this week’s EU summit.
  • Extension would be finalised in days before 29th March.
  • The plan is to allow for May to try and get deal through next week.

With no further details being provided by the UK, that's the best the EU can do at this point. What it means is that there is near certainty that there will be a Brexit extension next week but the bigger question will be for how long? If May gets her deal passed on a third meaningful vote before March 29th, then it'll be a short extension. If not, it will be a longer extension with the possibility of it being cut short should there be an agreement signed or if Article 50 is revoked.

@ 15:55pm today from Huffington Post……

DUP won’t back PM May’s deal unless it can win commons vote.

“The Democratic Unionist Party is not prepared to back Theresa May’s Brexit deal unless it is convinced it can pass a House of Commons vote, HuffPost UK understands. The support of the Northern Irish party, which props up the prime minister’s government, is seen as the key to unlocking the backing of Tory Brexiteers looking for a reason to lend their support to her agreement. But ministers’ talks with the DUP have stalled, with one insider remarking that they “can’t see a breakthrough at present”. The DUP is keen to strike a deal in which the government will provide enough legislative and legal assurance to convince the party that Northern Ireland’s place in the union is not threatened by the controversial Irish backstop. However, HuffPost UK has learnt that even if ministers prevail, the party will be reluctant to compromise unless they believe there are enough Tory and probably Labour MPs willing to help May’s deal pass“.

The week ahead……

With this afternoons news now pushing back when PM May’s next meaningful vote will be but still keeping alive the fact there will be another vote before March 29th, focus could turn back to economic data and there is plenty for markets to focus on this week including a BoE interest rate decision. Although the BoE have their monthly meeting this week, everyone is expecting them to sit tight at least until there is some clarity on Brexit. The other focus will be on UK’s Retail data on Thursday and Euro zone data from their manufacturing and Services sectors.

GBP/EUR & EUR/GBP Weekly Movements

With market sentiment for GBP/EUR rate so volatile at the moment typical trends we’re use to seeing are changing by the hour. Overall Sterling exchange rates are holding on to most of its gains from last week - Current key trading level is now around the €1.1630’s. If we see the rate move LOWER than this level for a sustained amount of time, then the likelihood of the rate moving into the high €1.15s will be high. As with such high volatile times the rate could easily move up HIGHER on the back of an unexpected Brexit updates and if we see the rate move above €1.17’s for a sustained amount of time then we could see it push towards the €1.18’s. It should be noted that on two occasions last week the rate pushed towards the €1.18’s but failed to push higher. Anyone hoping to achieve €1.18+ will need to keep in mind that the best chance of seeing this happen will be PM May getting her deal through the House of commons and EU granting a short extension. This is in my eyes is the best case scenario for Sterling exchange rates and anything else won’t have as positive affect.

Low Risk takers with pending exchanges that need to be made this week, should consider making their exchange while the interbank rate is above or close to the €1.17’s. Although markets are still optimistic that something will be agreed before March 29th, this doesn’t mean it will 100% happen and the EU has already said an extension is not guaranteed.

Medium Risk takers with pending exchanges that need to be made this week, should consider making their exchange while the interbank rate is above of close to €1.17. Medium risk takers can take comfort in the fact Sterling exchange rates are holding up well even in the light of some negative news but this is Brexit and we’ve all seen how quickly things can change without notice.

High Risk takers with pending exchanges that need to be made this week, could (again) hold off to see how PM May’s 3rd attempt of getting her deal through the house of commons goes. There was a number of MP’s suggesting they would now get behind her on the 3rd attempt but could still leave her a little short of the required majority.

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