Newsflash: EU approves 'flexible' 31 Jan Brexit extension

Ahem, Swing low, sweet Chari-o-ot, coming for to carry me hoooooooome…. Just one word… ‘Awesome’! I make no apologies for having a croaky voice this morning after one of the most complete England performances most of us have ever seen. Commiserations to Wales, especially Alun Wyn Jones. It would have been good to see you progress to the final.

Anyway, you know that feeling when you fall asleep and awake hours later feeling like you only blinked? Well that’s how the foreign exchange market feels this morning. Nothing has really changed since Friday; the exchange rates are largely the same but there are some underlying factors to weigh up. Sterling could be supported by the breaking news of a Brexit extension being approved by the EU, with flexibility built in, if needed.

Pound treading water awaiting Brexit decisions

Chief amongst these is of course the enigma that has become Brexit. We will either get a decision on a General Election or a delay to the Brexit process or both this week. Boris Johnson’s camp feels they can force an election that they are confident they will win. Oddly, the Scottish National Party (SNP) and the Liberal Democrats might be his unlikely and uncomfortable allies in that. The Democratic Unionist Party (DUP) is unlikely to want a General Election because they may lose the influence they have right now and the Labour Party is likely to try to vote down an election call for reasons of their own; few of which have been explained. Meanwhile, with so little clarity, the Pound is treading water around USD 1.2850 and EUR 1.1560 (86.5p on the flipside). Any unexpected smattering of clarity will impact Sterling, so currency volatility is an ever-present factor.

Politics also causes concerns for Germany

Germany had a local election in Thuringia over the weekend and Angela Merkel’s centre-right party took a bit of a battering from the more right wing AfD, which more than doubled its share of the vote and overtook Mrs Merkel’s Christian Democrats (23% to 22% respectively). The national repercussions are pretty obvious, with many citing Angela Merkel’s open doors policy as being behind the right wing gains.

You may also find interesting:

• What to watch out for this week and what you may have missed so far

• How Brexit Will Impact the Art Industry - Key Insights from Olyvia Kwok

World markets quiet overnight

The currency markets were quiet overnight as Diwali (A belated Happy Diwali to you all) was celebrated with public holidays in Singapore and India. It is also Oxi Day in Greece, Oxi (or ohi) means NO and this commemorates the day Prime Minister Ioannis Metaxas said ‘No’ to an ultimatum from Benito Mussolini during the Greco – Italian war in 1940.

US Dollar will be volatile this week

The US Dollar is reasonably flat ahead of a potential interest rate cut from the US Federal Reserve. There is no guarantee the Federal Reserve will cut their base rate on Wednesday evening, but pressure from the US President and business leaders may just pay off and a cut to 1.75% is a real possibility. Be ready for the volatility around that announcement. We will also see US economic growth data this week, so more reasons to do the Boy Scout thing and be prepared.

There will also be Gross Domestic Product (GDP) data from the Eurozone and an interest rate decision from the Bank of Canada this week, plus plenty of other data releases and news to keep things lively.