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Sterling hits lows as EU agrees to extension

The EU granted a conditional extension to Brexit until 12 April to allow for a third meaningful vote on the Brexit withdrawal agreement.

EU agrees to delay Brexit until 31 October

Sterling fell to its lowest level against the Euro in a month and the Dollar for two weeks as it became clear that Theresa May was facing a hard job to secure a Brexit deal. The Pound dropped to as low as €1.1494 and $1.3042.

EU leaders have agreed an extension to Brexit until 22 May on the condition that UK Members of Parliament back the Prime Minister’s deal in a third meaningful vote next week. If the PM fails to get backing, she will have until 12 April to decide whether to seek a further extension or leave with no deal.

Even if May requests an extension beyond 12 April, the EU could still refuse. French President Emmanuel Macron warned that a third defeat on the Brexit withdrawal agreement would mean “going to a no-deal”, adding to pressure for MPs to pass a meaningful vote.

Meanwhile, the Bank of England (BoE) yesterday, 21 March kept interest rates on hold. The Monetary Policy Committee (MPC) remains in a “wait and see” mode while Brexit clouds the outlook. Despite strong data from the labour market and retail sales, the BoE stated that Brexit will be the biggest driver of the path of interest rates, suggesting that a cut may be needed if Britain leaves the EU without a deal.

European data may steal the limelight from UK politics this morning. The Purchasing Managers’ Index (PMI) release is expected to show that business confidence has grown since February. However, there are still concerns over the manufacturing sector in Germany, Europe’s powerhouse, which could cause volatility in the Euro.

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