Problems in Great Britain with limited impact on pound (Daily analysis 19.03.2019)

The UK is unlikely to leave the EU in a chaotic way, although there is still no solution to the Brexit. Economists surveyed by ZEW are much less pessimistic than in February. The zloty is slightly stronger along with other emerging market currencies. The euro is close to the 4.29 PLN boundary.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

• A lack of macro data may noticeably impact the analyzed currency pairs.

Another problems related to Brexit

When the Conservatives negotiated with the DUP coalition to support Theresa May's plan, the current cabinet got another punch. According to John Bercow, the Speaker of the House of Commons, in the same parliamentary session it is not possible to vote again on the already rejected bill if it does not contain significant changes. Since no major modifications to the Brexit agreement are planned, it cannot be voted on.

This may significantly reduce the options of Prime Minister Theresa May's cabinet, although - as the British media point out - if the government really wanted to convince the Eurosceptic Tories and the Northern Ireland DUP to support the agreement, this obstacle could also be eliminated.

In today's commentary "The Guardian" emphasised that nuclear options to avoid the Speaker's actions are possible. These include, for example, the end of the current session of the parliament and the start of a new one. Then it would be possible to vote on the old Brexit agreement. As an alternative, the parliament may take control, which also gives the possibility to vote on the May plan, even taking into account the objections of Bercow. However, for these extraordinary measures to be applied, Prime Minister May needs a majority. And that majority does not currently exist.

Therefore, the option of extending Article 50 by more months is becoming more and more likely. "The Sun", referring to its sources, wrote today that Prime Minister May will ask to extend the negotiation process by 9 or 12 months at the EU summit (Thursday and Friday). This would mean that the British people would have to participate in the elections and, in general, that the current government would fail to conduct the negotiations.

With the current composition of the parliament, additional time may prove to be somewhat unproductive. If an agreement within the British government has not been negotiated for more than two years, it seems that the government has been unable to do so and early elections should be held. This, of course, poses an additional risk to the pound, but incomparable to the chaotic Brexit. As we mentioned yesterday, early elections also generate an opportunity for the pound in the form of a more moderate composition of the future parliament.

The European Union should not make any problems with the extension of the Article 50 as much as possible in order, on the one hand, to facilitate consensus and, on the other hand, to discredit the idea of the Brexit itself, which is simply detrimental to all parties. Today, despite parliamentary divergence, there is no fundamental threat to the pound in the British Islands.

Better ZEW and neutral data from Poland

Slightly better than expected data from the German economy were received in the morning. Economists surveyed by ZEW are less pessimistic than in February, and the ZEW economic sentiment index rose from minus 13.4 points to minus 3.6 points. However, in the case of all major economies in the world, respondents are less pessimistic, which may, however, be more a result of solid growth on markets than the actual macroeconomic data from Japan, Great Britain, Germany or the USA.

In the case of the Polish market, today's data for February on employment and wages were quite close to consensus and readings from the previous month. Therefore, they should not influence the zloty. On the broader market, the sentiment is relatively good (growing equities, weaker dollar), which supports, e.g. Poland's region. Today, the forint is clearly appreciating against the euro, which also helps the zloty somewhat. The EUR/PLN exchange rate is close to 4.29 level in the early afternoon.