US markets closed at a fresh five month high in the wake of this week’s unexpectedly dovish tilt from the US Federal Reserve, which removed the prospect of any more rate rises this year. Tech stocks led the gainers, as Apple surged higher, breaking above its 200 day MA for the first time since November, ahead of next week’s eagerly anticipated media event on Monday.

The successful launch of the Levi Strauss IPO also added to the feel good factor, closing up nearly 32% on the first day of trading. Asia stocks on the other hand slipped back weighed down by continued uncertainties over the next move in US, China trade talks, and this looks set to translate into a mixed European open this morning.

The pound had a roller-coaster session on the currency markets yesterday, at one point dropping over 1% on the day against the US dollar as traders fretted about the prospect that a week from now the UK could leave the EU without a deal.

With little sign of compromise on either side and the European Council meeting to try and open up options to grant the UK’s wish for an extension to Article 50 looking rather limited, the pound also slid to a four-week low against the euro, before rebounding, in the wake of last night’s events in Brussels.

There was some concern that time was running out in the legislative calendar to pass the necessary legislation, to get an extension approved in the time available, with some saying that any statutory instrument would have to be submitted on Monday in order to make sure it received the necessary Royal Assent in time. There are however mixed views on the timeline of this particular procedure.

Initially the EU were minded to only offer an extension to article 50 until May 22nd if the Prime Minister were able to get her deal through the House of Commons at the third time of asking, or go to “no deal”. After Mrs May’s rather misguided, if understandable on some level, swipe at MPs the passing of the deal is highly unlikely to happen now, in fact it would probably lose by more than the 149 votes it lost by on the second round of voting.

This means the EU needed a Plan B in order to buy more time to come to some other outcome than a “no deal” outcome, while MPs in Westminster need to get their act together. The Plan B agreed has added the option of a shorter extension to April 12th if the deal is rejected, which looks likely. This would then, in theory, allow Parliament, to explore alternative options, including the possibility of the removal of Theresa May as Prime Minister, who is looking increasingly isolated.

Two weeks ago, MPs voted in a non-binding vote to stop the UK leaving the EU without a deal, yet here we are one week away and that is precisely where we were heading. With last night’s compromise MPs should be able to amend the statute book to alter the UK’s departure data, however it is only a case of departure deferred for now.

Having been slowing now for over a year, the French and German economies did show some signs last month that they might be starting to show signs of a turnaround in some of the latest PMI data, despite the looming prospect of a “no deal” Brexit. The improvement was admittedly rather mixed with France services data remaining weak, while manufacturing improved. In Germany the opposite was true with manufacturing activity sliding sharply, while services improved.

This morning we’ll get a snapshot as to whether we could be on the cusp of a possible uptick after more than months of decline, though any improvement may well be moot if there is no sign of the EU and UK averting what could be a significant economic disruption a week from today, in the form of a “no deal” Brexit.

For all the bluster and blather from the EU Council over the last 24 hours it is a fiction that somehow one side or the other holds the upper hand, though at least the EU are showing more sense of unity than the political dysfunction being demonstrated here in the UK.

French flash services PMI for March is expected to improve slightly to 50.6, from 50.2, but with the gilets jaunes protests still disrupting Paris on a weekly basis activity here could well remain muted for some time. On manufacturing expectations are for 51.4, a slight slowdown from 51.5.

In Germany manufacturing is expected to improve from a six year low of 47.6 to 48, though services are still expected to remain steady at 55.

The Canadian economy appears to have stalled in the last couple of months, thus prompting the Bank of Canada to adopt a much more dovish tone at its most recent rate meeting, when it removed a reference that rates might need to rise further over time. The inflation outlook has continued to show no signs of picking up while consumer spending has remained muted with retail sales declining two months in a row.

Today’s inflation and retail sales numbers for February could well reinforce this weak outlook, though after several months of declines, we are overdue a pickup in consumer spending, with a pickup of 0.4% expected in retail sales.

EURUSD – after failing at the 1.1450 area we’ve slipped back below 1.1400 finding some support at the 1.1340 area. This failure below the 200-day MA could precipitate further weakness in the short term with a break below 1.1320 arguing for a move back towards 1.1270.

GBPUSD – continued its slide yesterday sliding below the trend line from the December lows at 1.2430, before finding support at the 1.3000 area, which is where we also have the 200-day MA. While above this key support the potential remains for a move back towards the highs this week. Below 1.3000 opens up the 1.2800 area.

EURGBP – pulled all the way back to the 0.8720 yesterday before sliding all the way to the 0.8670 area. While this acts as support then a retest of the highs is possible. A move below 0.8660 reopens the 0.8620 level.

USDJPY – found support just above the 110.20 level yesterday. We need a recovery back above the 111.20 level to argue for a return to the 112.00 area. Below 110.20 argues for a move back towards 109.80.

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