Good morning,
GBP: May in Europe
It’s all very quiet in sterling ahead of tomorrow’s key EU summit that will see the EU27 vote on whether – and for how long – to offer as an extension to the UK to prevent a no-deal Brexit this Friday evening. That is tomorrow, however, and today Prime Minister May will meet Chancellor Merkel and President Macron to lay out her idea for an extension to the end of June.
Any extension offered tomorrow is likely to be until the end of the year and, whilst we have noted that would be taken by markets as an overall positive – pushing a no-deal into the long grass will help – eyes will then switch to the prospects for an election and sterling cannot be expected to hold gains in such an environment, especially if the economic news remains weak.
Once again, there is no data today but headlines from the May, Macron, Merkel meeting will have a short term pull on sterling although the offer of a deal is still largely priced into the pound and so a push higher may be off the cards.
EUR: Trump goes shopping
Following February’s decision by the US to designate imports of European-made cars as a ‘national security issue’, the focus has fallen on US/EU trade as much as US/China trade. While the latter may be close to some form of resolution soon, President Trump has heightened tensions between the two by proposing greater tariffs on a number of European goods.
The focus will largely fall on aircraft and aircraft parts given this change is largely in retaliation to European subsidies to Airbus. This will affect France, Spain, Germany and the UK – the four EU members that have Airbus manufacturing facilities.
The rest of the goods affected are a rather eclectic shopping list of cheeses, fruits, jams, seafood, fish, wines as well as motorcycles, table knives, ceramic tiles and kitchenware, bed linens, sweaters, handbags and essential oils.
The euro is relatively stable despite the news, with traders not looking for overexposure ahead of Wednesday’s European Central Bank decision.
Elsewhere, things are pretty quiet with a huge amount of risks event taking place tomorrow.
Have a great day.