2 days until the EU Summit, Brexit that you can’t take your eyes off! ~ Highlights and schedule for March 19 ~

Yesterday, there were many views and statements about the Brexit withdrawal bill re-vote and the postponement of Brexit. The pound showed high volatility and was broadly soft. It may be that the reason was the negative remarks from EU member states about extending the withdrawal deadline.

In addition, the Speaker of the House of Commons said that the vote on the third withdrawal bill could not be held if there were no changes to its content. This raised concerns that a vote before the EU Summit would become difficult, and I think it became a factor pushing the pound lower.

However, despite many negative factors for the pound as described above, the selling of the pound seems limited. It is unclear whether there is optimistic thinking or a wait-and-see attitude making moves difficult. I feel that when a decisive statement or headline appears, there could be a rapid move.

◎ Today’s Points of Attention

1) Brexit-Related

・What is the legal opinion on Brexit?

Yesterday or today, it was said that Chief Legal Counsel Cox would issue a legal opinion again, but it did not come out yesterday. So I think it may come out today.

Chief Legal Counsel Cox’s legal opinion, issued before last week’s withdrawal bill vote, caused the pound to fall. This time too, depending on the revision of Cox’s legal opinion, MPs/parties who support the withdrawal bill may emerge. Therefore, there is a possibility that the pound will move greatly with Cox’s legal opinion release. All eyes are on whether he will speak today.

・Will there be a second vote on the withdrawal bill?

Yesterday, there was a surprising statement. Speaker Bercow, famous for saying “Order!”, said he would not permit a vote on a withdrawal bill with the same content. This may have surprised Prime Minister May, who was planning another vote on the withdrawal bill last week. This statement has increased the view that another vote on the withdrawal bill may be impossible.

However, it is not that it is completely ruled out; if Cox’s legal opinion changes, it could be considered not a change of content but a change in legal interpretation, and another vote might be allowed.

・Will the withdrawal deadline be extended?

If the third withdrawal bill vote is not held, Prime Minister May says there could be a long-term extension of Brexit. Also, if the withdrawal bill is extended, there will be issues about how to handle the European Parliament elections.

Moreover, for an extension, approval from all EU member states is required. However, looking at yesterday’s statements, there are many voices against an extension, so an extension may not be possible. Clear justification is required for an extension. We should also pay attention to what conditions will be requested to apply for an extension.

2) Crude Oil Prices and the Canadian Dollar

Yesterday, both OPEC members and non-members announced that they would not hold the April meeting. However, they will maintain the current pace of production cuts until June and will continue to cut after June. In response, WTI crude oil prices have risen.

However, the Canadian dollar, which correlates strongly with oil prices, is having difficulty rising. It is not clear whether this is a signal of a sharp drop in the Canadian dollar or a fall in oil prices, but when correlations break down, it is a time of change, so I think we should watch carefully.

◎ Today’s Event Schedule

March 19 (Tuesday)

09:30 AUD Housing Price Index -RBA Board Meeting Minutes

18:30 GBP Employment Change / Unemployment Rate / Average Earnings

19:00 EUR Eurozone ZEW Economic Sentiment Index

March 20 (Wednesday)

Withdrawal Bill Vote Deadline

06:45 NZD Current Account

08:50 JPY Bank of Japan Monetary Policy Meeting Minutes

09:00 AUDBlock RBA Deputy Governor Speech