May Receives Brexit Extension
European Union leaders have agreed to extend the deadline for the UK’s Brexit until October 31, 2019, with a checkup of progress due in June. President of the European Council, Donald Tusk, said that the decision gives the UK an opportunity to find the “best possible solution” for its exit strategy. The decision was made during an emergency summit which was requested by UK Prime Minister Theresa May after UK policymakers rejected her previous plans. The original Brexit was planned for March 29, 2019 but was extended when the British Parliament did not back the deal that was offered. The Brexit was then postponed until April 12, though it was clear that this two-week extension was not enough time to tie up all the open issues.
The British pound rallied on the news, heading up 0.13 percent against the U.S. dollar to $1.3105 as of 1:12 p.m. HK/SIN on Thursday. The euro was up modestly, seeing a 0.05 percent gain against the dollar to trade at $1.1279. The dollar index hit a two-week low of 96.823 on Wednesday but it bounced back slightly to 96.90 .DXY in the early afternoon in Asia on Thursday. The greenback was under pressure after the Federal Reserve confirmed its recent dovish policy stance, and a strong reaction to the Brexit decision kept the pressure mounting.
Also pressuring the dollar was U.S. consumer price data released on Wednesday which showed a weakening picture. Annual core CPI inflation fell to 2.0 percent in March, the smallest increase since February 2018. In Europe, European Central Bank President Mario Draghi announced that the region was facing growing risks, and that the ECB would leave its easy money policy unchanged for the moment. The announcement kept the euro mostly stable against its primary trading partners on Thursday.