Markets were shaken yesterday by two major market moves. The first being Brexit entering its final phase, with the EU surprising many by putting conditions on an extension. The EU has said it will only grant an extension if MPs accept Theresa May’s final proposal, a move that has dramatically increased the probability of a no deal Brexit.
The pound struggled as a result, with the GBP/JPY falling from around 148.00 to test 146.00 this morning. The EUR/GBP shot higher, hitting 0.8650 yesterday, with minor selling this morning. GBP/USD selling was muted, with the pound holding just above 1.3200.
The GBP/USD was one of the few dollar pairs to fall yesterday as the FOMC surprised many by issuing guidance that rates would stay on hold at least through 2019. The dollar index continued its down trend, helping most dollar pairs (with the exception of the GBP/USD) to make gains.
The AUD/USD rose above 0.7100 yesterday and is challenging the 0.7150 level this morning despite China slowdown fears. The EUR/USD shot higher to fall just short of 1.1450 and fall back slightly to 1.1420 this morning.
The USD/CAD is on the rise after selling yesterday that pushed the pair below 1.3300. The USD/CHF saw the biggest moves, plunging well below the parity line to test the 0.9900 level for the first time since mid-January.
Yen pairs are on the back foot, with the USD/JPY crashing through the 111.00 level yesterday with further selling this morning. The AUD/JPY is unchanged as Aussie underperformance is balanced against yen weakness. The EUR/JPY’s falls have been more moderate as euro strength holds up yen advances.
This morning, we have the SNB monetary policy assessment, with the press conference at 09.00.
At 09.30, we have UK retail sales and public sector net borrowing.
At 12.00, we have the MPC official rate vote, released along with the monetary policy assessment and official bank rate.
The Philly Fed manufacturing index is at 12.30.
Gold is performing well and recovering from the early March weakness. We could see further upside for the precious metal, as Brexit concerns and dollar weakness combine to drive prices higher.