The circus is staying in town!

The euro briefly dipped against the dollar during yesterday’s ECB post-meeting press conference but has since recovered to trade just below the $1.13 level this morning. The pound is largely unchanged after the EU granted the UK another extension of Article 50, this time to the end of October this year, trading at just over 86p and just under $1.31 against the euro and the dollar respectively. Meanwhile, bond yields in the core markets are continuing to edge down, with 10-year yields in the US back below 2.50% and equivalent German yields back in negative territory

The market is pricing in some chance of the ECB cutting its deposit rate, currently negative at -0.40%, after yesterday’s Governing Council meeting, following which Mario Draghi noted that “the weakening of the economy..will extend into the rest of the year” while also acknowledging the current subdued inflation environment as well as the “sliding” of (market measures of ) inflation expectations. He also said the ECB will have more information, as well as an updated set of growth and inflation projections,  come its meeting in June, which may be the time it will take further action if it deems it necessary

The minutes of the Fed’s most recent policy meeting show that officials believed interest rates could shift in either direction – up or down – depending on how the economy evolved, albeit a majority expected that  the outlook “would likely warrant leaving (rates) unchanged for the remainder of this year”

The EU last night granted the UK an extension of Article 50 “which should last only as long as necessary and, in any event, no longer than 31 October 2019”. If the Withdrawal Agreement is ratified by both parties before this date, the UK’s exit from the EU will take place on the first day of the following month. However,  if the UK is still an EU member “on 23-26 May 2019 and if it has not ratified the Withdrawal Agreement by 22 May 2019, it must hold the elections to the European Parliament… if (it) fails to live up to this obligation, the withdrawal will take place on 1 June 2019”

Data due today includes jobless claims and producer prices in the US