Sterling regained some ground on some relief that the March 29 EU exit date had been extended.

The Euro declined sharply on Friday as much weaker than expected Euro-zone PMI data undermined sentiment, especially with fears over German manufacturing.

US manufacturing PMI data also deteriorated and the releases overall increased unease over the global outlook.

The US yield-curve inverted with 10-year rates dipping under 2.50% to 2.45% and also below the 3-month rate for the first time since 2007 which increased recession fears. Risk aversion triggered defensive flows into the yen with USD/JPY dipping below 110.00.

Equity markets were undermined by growth fears with significant losses across global bourses and risk appetite recovered only slightly.

Oil prices were also hurt by demand concerns while gold was protected by weaker risk conditions despite EUR/USD losses.

Sterling regained some ground on some relief that the March 29 EU exit date had been extended.

Relief that the UK had secured an extension to the Brexit deadline provided an element of Sterling support during Friday as choppy trading continued. There was also increased speculation of an eventual move towards a ‘softer’ Brexit, although uncertainty remained intense. The UK currency was also resilient in the face of weaker risk appetite and a retreat in oil prices.

As the Euro came under sustained pressure, GBP/EUR strengthened towards 1.1700 against the UK currency while GBP/USD advanced to 1.3200. CFTC data recorded a sharp decline in short, speculative, Sterling positions in the latest week to the lowest level since June 2018, limiting the scope for further short covering.

During the weekend, there was further speculation that Prime Minister May would be forced to resign, especially as such a move could increase the potential for Withdrawal Agreement approval. There were no actual moves or breakthrough in talks and GBP/USD retreated below 1.3200 with markets braced for very choppy trading surrounding parliamentary developments.

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