March 29th Exit Date Pushed Back

GBP

Sterling struggled yesterday after reports surfaced the European Union was going to reject Theresa May’s request for a three-month extension to Brexit. Late last night, after eight hours of talks, EU leaders offered to delay Brexit until 22 May if MPs approve Mrs May's withdrawal deal in the House of Commons next week. EU ambassadors believe the risks of having the UK as a member state beyond 23 May, when European elections are due, were too high.

If MPs do not approve the withdrawal agreement at the third time of asking, the delay will be shorter - until 12 April - at which point the UK must set out its next steps or leave without a deal. The government will be able to seek a longer extension during that period if it can both “indicate a way forward” and agree to hold European elections.

At the EU summit Theresa May has said she "sincerely hopes" the UK will leave the EU with a deal when she spoke to the other 27 leaders to try to get their backing for a delay beyond 29 March. French President Emmanuel Macron has warned that if MPs vote down Mrs May's EU withdrawal agreement next week, the UK will leave without a deal. "In the case of a negative British vote then we'd be heading to a no deal. We all know it. And it's essential to be clear in these days and moments," said Mr Macron. EU Brexit negotiator Michel Barnier said that a short Brexit delay "should be conditional on a positive vote next week in the House of Commons".

In other non-Brexit related news, the Bank of England has kept interest rates on hold amid continued uncertainty over Brexit. All nine members of the Bank's Monetary Policy Committee (MPC) voted to keep rates at 0.75%, where they have been since August last year.

Key Announcements

08:30 – EUR: German Flash Manufacturing PMI; expected to increase to 48.0 from 47.6
09:00 – EUR: Eurozone Markit PMI Composite; expected to increase to 52.0 from 51.9