Draghi, Brexit Deadlines & FOMC

Wednesday's FX & Indices levels are back to where they stood 24 hrs ago but a busy schedule today will make for meaningful price action. The monthly ECB press conference and FOMC minutes from the March meeting are due at 13:30 and 19:00 London time respectively (GMT is now 1 hour behind London). US CPI is also due at 13:30. A new trade was posted yesterday with detailed chart & rationale. UK GDP and industrial production beat forecasts but GBP is focused on the EU's decision regarding Brexit extension.

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The EU is pushing for a March 30, 2020 Brexit extension in what would be another blow to Conservative party unity but it would calm some UK economic nerves and likely aid the pound. But critical details are yet to be scrutinized as it could imply a flexible, allowing an earlier withdrawal.

So far EU leaders have been accommodative – at least in public – to the endless tomfoolery from UK parliament but there is no guarantee their patience won't run out. By the same token, Theresa May is on her last legs as PM and a victory for her would be a miracle but not impossible. There was short-lived rumor of a 5-year cap on the Brexit backstop Tuesday, but it was denied swiftly. Even with that, she would have a tough time cobbling together enough votes to pass her deal.

Today's ECB decision/press conference won't be as captivating as last month but there is some intrigue. Draghi will be grilled on TLTRO details but is likely to punt until June. The market mover is likely to be the assessment and commentary on the economy. Risks are still to the downside and Italy cut its GDP forecast to just 0.2% on Tuesday but will Draghi still hold out hope for an H2 rebound? The latest reading from the Eurozone's Economic Surprise Index by Citi is at -51.80, its highest since March 22, besting its US counterpart of -55.70. 

Technically, the euro held 1.1180 last week and that's the key level to watch.

On the US side, CPI is a top-tier data point to watch but it's tough to see it jarring the market unless it's a significant miss. Inflation pressures are muted.

The Fed minutes could be a bigger market mover. The latest comments from policymakers suggest more of a hawkish bias than the market is currently pricing. If they emphasize that in the minutes and economic data solidifies for a few months, there is a risk of a rethink (and the risk-off mode that will come with it).