Sterling managed to chalk up some wins last week on hopes of a Brexit breakthrough, but were all these just from wishful thinking? Will the breakup still push through?
EU Emergency Summit (April 10)
Based on earlier talks, the U.K. is set to leave the union by the end of this week, but the EU Brexit Summit scheduled for Wednesday could still change all that.
This emergency summit will gather the 27 heads of state and government likely to discuss whether or not they should grant the U.K. yet another extension. PM May has written to the EU to request for a delay until the end of June to buy more time for lawmakers to agree on a transition deal.
European Council President Donald Tusk has also proposed a “flexible extension” that could last as long as 12 months or expire once the House of Commons reaches an agreement. So far, lawmakers have voted on the deal three times and have also rejected it thrice.
Also, note that No. 10 has already suggested an extension until June 30 earlier on but this idea was also rejected by the EU. This particular date comes a day before the European Parliament holds its first session.
Of course a bunch of European leaders are opposed to a longer extension or a flexible one, as this could prolong the uncertainty in the entire region. Under EU law, they have to reach a unanimous position to settle the matter, so expect a lot of debating during this summit.
Brexit date? (April 12)
Preparations are still underway for the U.K. to officially exit the EU on April 12 as agreed upon since parliament has been unable to approve a deal. By the looks of GBP price action, though, it seems that market participants are still hopeful that this date would be pushed back again.Should EU leaders still decide to stick to this date, it would confirm pound bulls’ worst fears of a “no deal” Brexit that could drag the U.K into recession.
Apart from Tusk’s “flextension” idea, another short delay of around a month until mid-May could be an agreeable middle ground. A potential plot twist could also involve the U.K. government actually agreeing on an alternative deal, possibly one from the options put forward in the indicative vote.
Just a friendly reminder to be extra careful when trading GBP pairs this week because, if there’s something we’ve learned from recent Brexit events, anything could happen!
Missed last week’s price action? Read GBP’s price recap for April 4-8!