In today’s European session, we get Germany’s and France’s final HICP rates for March as well as Sweden’s CPI rate for the same period. In the American session we get the US PPI rates for March and a number of speakers from the Fed along with BoC’s Wilkins. Please note the release of RBA’s financial stability review tomorrow during the Asian session.

The ECB remained on hold as was widely expected at 0.0% and the common currency had little reaction to the release. In the accompanying statement no reference was made to the recently announced TLTROs, rates are expected to remain at present levels throughout 2019 and QE debt to be reinvested for an extended period. Analysts point out that the ECB is expected to remain on hold for a long time, after the recent significant slowdown. In his press conference ECB President Mario Draghi, stressed the risks facing the Eurozone, also mentioning the risks from trade disputes after recent threats made from US president Trump to impose tariffs of European products. The ECB president avoided to comment on tiered negative rates, as it would require further analysis. We expect the EUR to remain data driven, but also sensitive to any further trade frictions with the US in the near term.

The EU postponed any hard Brexit risks, by granting to the UK an extension of the Brexit date until the end of October. The decision as such, was not able to show a way forward for the resolution of the issue and ended providing little support for the GBP. Progress made will be reviewed probably in June and the UK may be required to take part in the UK Parliament elections, which are to be held in May (if no solution has been found until then). Looking at the big picture we would like to stress that the risk of a hard Brexit is only temporarily removed and all options remain on the table, while at the same time the UK was able to buy some breathing time. The overall plan is expected to cause an uproar back in London, as Tory hard Brexiteers seem to be getting impatient with May’s leadership and we could see them building up pressure by trying to over through her or discredit her. Also we would place considerable weight on the negotiations between the UK government and the opposing Labour party regarding Brexit. The fact that these two political processes run at parallel lines creates considerable confusion for the inner political stage of the UK. If we see the inner UK political stage destabilizing somewhat in the near term, we could see the GBP losing ground, while if the negotiations with the labour party start creating positive headlines, we could see the GBP getting some support.