Sterling steady ahead of EU summit

The pound is steady against both the euro and the dollar this morning, at around 85.5p and $1.3250 respectively, ahead of tomorrow’s EU Council meeting, which will consider an expected request from the UK – Theresa May’s letter is in the post it is believed – for an extension to Article 50.  The single currency, meanwhile, is consolidating around the $1.1350 level against the dollar, as  it holds onto last week’s gains but still finds it hard to advance any further. Elsewhere, equity markets were flat (US) to slightly higher (Europe) yesterday, with core bond yields unchanged to marginally up on the day

It’s reported that PM May will hedge her bets in relation to her request for an extension to Article 50, seeking a short one in order to try and get her deal passed in parliament (Speaker allowing of course) but failing that then a longer extension. The EU’s chief Brexit negotiator, Michael Barnier, suggested yesterday it has to be one or the other, though he won’t have the final say – that will be for the heads of the EU27 – but he’s correct when he says what the EU does not want is to be back in the same situation as now at the end of any extension period (so it must to be “an extension for a purpose”).

The labour market in the UK performed very strongly over the three months to January this year, with employment increasing by over 220,000 – an increase of 0.7% from the 3 months to October – and the unemployment rate falling to a fresh cycle low of 3.9%, while the annual rate of increase in weekly earnings (excluding bonuses) remained at a multi-year high of 3.4%. Absent Brexit and the Bank of England would almost certainly be raising interest rates in response

The Fed is set to keep interest rates unchanged following today’s monetary policy meeting while reiterating that it can be “patient” before deciding what its next move should be, though it is likely that it will signal that some further modest increase in rates might still be appropriate. The Fed may also confirm that it plans to end its balance sheet rundown by the end of this year

It is relatively quiet on the data front today with February CPI inflation scheduled in the UK