UK inflation sticks close to target - back to Brexit
We have seen some GBP weakness this morning, emanating from the news that the UK PM, Theresa May will be seeking a short extension rather than a long delay, as the latter option has been drawing heavy criticism from hard-line Brexiteers within the Conservative party.
As for this morning's data, we saw headline CPI coming in at 1.9%, a tenth higher than expected, though this was offset by core CPI moving down a tenth to 1.8%, though both rates are close to the target area to keep the BoE on an even keel. The central bank meets tomorrow and is widely expected to keep policy unchanged - certainly until we get some more clarity on the Brexit process which is coming to a head.
The government has now asked the EU for an extension, though the EU is keen to find out what the time will be used for. The EU Summit will discuss the matter and is expected to issue a decision next week. In the meantime, Donald Tusk, leader of the European Council, is set to release a letter this evening.
Cable is testing back towards 1.3200 again, though buyers are still keen to jump in as the no deal votes last week point to a greater likelihood of a soft Brexit. We tested down 1.3180 at the start of the week and this will likely be the first point of call, with strong demand expected in the 1.3150-60 - that is if 1.3200 can be breached!
EUR/GBP is also pushing back towards 0.8600 again and we came against some heavy resistance here on Monday also. 0.8645-65 is a major resistance zone above 0.8600, which is looking well protected for now.