- Brexit deadline extended till 31st October
- Little reaction in GBP and the FTSE
- Stocks remain well supoported after Central Bank updates
The high drama of a Brussels summit between the 28 EU leaders that ran late into the night failed to cause a commensurate move in the markets, with both the pound and UK stocks decidedly nonplussed at the outcome. An extension of the April 12 deadline was widely expected, but there was a little bit of a surprise in the new length agreed upon which means the UK is now set to leave the EU by October 31.
GBPUSD remains below key near term resistance at 1.3120 while a rising trendline from last week’s low around 1.3000 is providing support. Source: xStation
Compromise that suits no one
As has become a recurring theme with Brexit in recent months, the latest compromise doesn’t really suit any party but has been seemingly undertaken to avoid the worst case scenario. Reports suggest that the majority of EU members were willing to grant a longer extension, but French president Macron was reluctant to agree to this and the new end date was decided upon. As far as the markets are concerned, opposing forces are at work with the avoidance of the worst case outcome of a no-deal Brexit clearly positive, but the prolonging of the uncertainty accompanied with an underlying feeling that this is little more than kicking the can further down the road will likely keep an upside in check.
Stocks remain well supported by Central Banks
After falling on Tuesday, stock markets recovered yesterday with both the ECB and Fed delivering supportive messages. ECB president Mario Draghi was expected to err on the dovish side after the governing council but he went a little further than most thought in opening the door to further stimulus for the Eurozone if needed. The minutes from the most recent Fed decision were also mildly pleasing for stocks, with rate-setters showing little inclination to resume their hiking cycle anytime soon while also hinting at the possibility of rate cuts. To summarise, these events weren’t spectacular by any means but they do both serve to reaffirm the notion that the end of accommodative policy from the world’s leading central banks may have been exaggerated and while this remains the case then the year-to-date rally for stocks looks well supported in the near term.