D-Day for May

Macro 5 minutes to read

Christopher Dembik

Head of Macroeconomic Research

Summary: The Brexit saga winds on as the UK votes to delay its departure from the EU.

As was the case for the past two days, today's focus in financial markets will be on Brexit. The House of Commons will vote on legislation to delay withdrawal from the European Union, and this will likely pass. However, negotiations are far from over since PM May will need to go back to Brussels to ask the EU-27 for an extension. It is not a done deal as it requires unanimous approval from member states. Courtesy of the BBC, the following diagram illustrates the options ahead.

Either the EU is open to an extension on the condition that PMay comes with a clear plan, or the EU refuses, which would trigger a very negative political situation that could lead to a no-deal Brexit, a general election, or confidence vote or even a second referendum. In our view, the EU will probably grant a short extension period, which means that the PM will need to act fast to align her own party on the issue. It is unlikely that the EU will be ready to negotiate a new deal, only some adjustments could be discussed.

Elsewhere, we expect a bunch of US data in the afternoon, especially weekly initial jobless claims and January new home sales. Consensus estimates jobless claims might slightly increase by 2k to 225K in the week ended March 2. For home sales, consensus expects an increase by 0.6% in January. The market impact should be limited as many investors will be focused on the UK Parliament vote today.

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