(28JANUARY 2019)DAILY MARKET BRIEF 1:Brexit wake-up call this week
It’s such a mess that even the apolitical Queen Elisabeth has weighed in, asking her kingdom to “seek out common ground and grasp the big picture.” A second Withdrawal Agreement (i.e. Brexit), not fundamentally different to the first, will be proposed on Tuesday. Prime Minister Theresa May has been using all her cards to get concessions from the European Union, while impatience among EU leaders builds. After two and a half years of talks, Brexit seems stuck at the same spot. So how will a proposed extension of the divorce deadline to year-end help anything?
It seems the EU might accept a “conditional extension” that would require the UK to provide realistic reasons for buying extra time. Such a request would need approval of the European Council, which is not planning to hold a special summit before March: this should push the British pound under heavy pressure as the existing Brexit deadline of 29 March nears. Meanwhile, the Bank of England is not expected to change its policy rate next week. It is expected to adopt a “wait and see approach” while communicating its readiness to intervene under any Brexit scenarios. GBP/USD is currently trading at 1.3156 (+3.27% year-to-date), heading along 1.3060 short-term.
