EU officials fear that Theresa May will not be able to deliver Brexit and a no-deal is on the table. They believe that the U.K. will crash out of the EU without a deal as they feel May does not have the ‘political courage’ to ask for more time and to delay Brexit by extending article 50. Senior figures in Brussels are speculating the moves of the British government and believe that a delay is inevitable.
Furthermore EU officials believe May’s strategy is risky and they firmly believe that May will ask for an extension of 3 months to negotiate further. Jeremy Hunt also echoed the opinion of senior EU ministers by saying that Article 50 may have to be ‘prolonged’ describing the current situation as ‘very challenging’.
EU sources believe that all 27 member states are unlikely to reject a further extension and will allow the UK to extend article 50. May is now getting ready to head back to Brussels to negotiate the current deal and will look to seek ‘alternative arrangements’ regarding the Irish backstop problem.
In the final three months of 2018, the economy shrank by 0.2%, following a 0.1% decline in the third quarter, the Istat statistics office said. Italian Prime Minister Giuseppe Conte said the contraction was likely to continue into 2019.
Meanwhile, figures from the EU showed economic growth in the 19-country eurozone still languishing. Growth in the euro area remained at 0.2% in the final quarter of 2018, the same as the previous quarter and in line with analysts' expectations.
In contrast to Italy, some other eurozone economies expanded more than expected, with France and Spain posting growth rates of 0.3% and 0.7% quarter-on-quarter respectively.
Italy's coalition government was forced to revise its expansionary 2019 budget last month after the European Commission raised concerns about the impact on the country's debt levels. Italy's problem is its accumulated debt, which is on one measure the largest in the eurozone.
It would be a huge problem for the rest of the eurozone if Italy were to suffer the kind of debt crisis that Greece and others experienced a few years ago.
The US and China are close to breaking the deadlock regarding a trade deal between the two countries. President Donald Trump said “Meetings are going well with good intent and spirit on both sides”. He was also quoted saying ‘no deal will be finalised’ until he meets Chinese President Xi. Trump wants to secure a deal before the 1st March when 25% tariffs are placed on China and wants everything to be negotiated in full leaving nothing unresolved.
13.30 – USD: Average Hourly Earnings MoM; Forecast at 0.3% against previous of 0.4%
13.30 – USD: Non-Farm Employment Change; Forecast at 165K against previous of 312k
13.30 – USD: Unemployment Rate; Forecast same as previous at 3.9%
15.00 – USD: ISM Manufacturing PMI; Forecast the same as previous at 54.4