The calm after the storm?
|It’s been a very intense period for the GBP. Yet now that a no deal risk is back to minimum and that the European Council appears willing to provide the UK all the time it needs in order to reach an agreement, the wording should rather be that it turns out to become a “permanent extension” and that the 31 October 2019 deadline is thus not written in stone. The UK is expected to take participation in 23 May 2019 EU parliamentary elections in order to ratify the current departure date.
Still, although GBP risk is back to normal, it is becoming clearer that the risk to the real economy is still vivid. The Bank of England adopted a wait-and-see approach in the past 8 months while despite a strong labor market, the economy has been facing major disruptions on the front of fixed asset investment, external trade or inflation. March CPI figures are pointing towards a slowdown to 1.90% (prior: 2%) year-to-year and remains flat m/m (0.20%) while producer prices stay on track (2.40% y/y).
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Following recent releases, GBP is likely to drop in current session. Currently trading at 0.86745, EUR/GBP is heading along 0.87040.
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