EU and UK agree transition period
UK Brexit Secretary, David Davis travelled to Brussels to meet with his EU counterpart, Michel Barnier to reach an agreement on the transition period deal today. Sterling gained, as it was announced an agreement had been reached between the two sides. Despite UK Prime Minister, Theresa May, originally asking for a transition period which would last for ‘around two years,’ the deal which has been reached will last until the end of 2020. The deal would see the UK continuing to operate as if it was an EU member until this time, giving businesses time to adapt to the changes. However, although the UK will remain as part of the single market and custom union for this time, it will not have the right to vote on any of the rules. This transition period deal will now have to be agreed at the EU summit later this week, by the 27 other members. If the deal is agreed on, the Brexit talks can turn to the future relationship between the UK and the bloc.
Russian President, Vladimir Putin, will remain in power for another six years, after winning the Russian election by a landslide. Putin received 76% of the vote, with more than 67% turnout of voters. However, the result has been met with criticism, as election officials have been accused of ballot-rigging. Tensions are still rising between Russia and the US and Europe, after the UK accused Russia of being behind the poisoning of a former spy, by use of a nerve-agent.
There is a quiet start to the week with no high tier data on the economic docket. The G20 Forum will begin today, with members of Government and central bank governors from the 20 countries meeting to discuss cryptocurrency and trade tariffs.
On Tuesday, the UK will release the latest CPI reading. It is expected to drop from 3% in the previous reading to 2.8%. A slowdown in inflation will reduce the pressure for the Bank of England to raise rates as quickly as previously thought. In the Eurozone, the German ZEW Economic Sentiment will be released. The Index is expected to drop from 17.8 to 13 for March.
The UK will be releasing the latest readings of their Labour Data on Wednesday. The Average Earning Index is expected to uptick to 2.6%, whilst the Claimant Count Change is expected to increase to -3.1k from -7.2k last month. It is forecast that the Unemployment Rate will remain at 4.4%. Across the pond, the FOMC meeting will conclude with the release of the Rate Decision and Monetary Policy Statement. It is widely expected the Fed will raise rates on Wednesday to 1.75%, in Jerome Powell’s first meeting as chair of the Federal Reserve. The markets will be looking towards Powell’s press conference which follows, as to any indications as to the speed in which the Fed will be raising rates this year. After the meeting in January, there were speculations the Fed could raise rates four times, rather than the three planned.
Market focus will be on the UK on Thursday, as the Bank of England meet. It is not expected that the BOE will raise rates in this meeting, however the markets will be looking closely at the statement for any indication of a continued hawkish tone which could indicate their plans to raise rates in May. Also out from the UK, will be the Retail Sales figure for February, which is expected to tick up to 0.4% from 0.1% in the last reading. In the Eurozone, Flash Manufacturing and Services PMIs are scheduled to be released. They are forecast to read, 58.1 for Manufacturing and 56 for Services. Individual readings from Germany and France are also expected. The German Ifo Business Climate report will also be released, expected to drop slightly to 114.7 from 115.4 last month.
On Friday, the US Core Durable Goods Order Index will be released, expected to post 0.5%. FOMC member, Raphael Bostic, is expected to speak at the Knoxville Economics Forum on the economic outlook. Back in the UK, BOE member, Gertjan Vlieghe, will be speaking at the Birmingham Chamber of Commerce.