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Pound remains steady ahead of crucial EU summit

GBP - British Pound

GBP/USD has traded a narrow range over the last 24 hours as investors await the outcome of the EU's emergency summit today, at which the EU 27 will be deciding on whether to delay the UK's exit date. All the rhetoric suggests it will be approved, and an extension of some sort seems well priced into GBP, but the question on everyone's lips is whether it will be a short or long extension. PM May has requested an extension to 30th June but EC President Donald Tusk is suggesting something longer - a "flexible extension" lasting "as long as necessary and no longer than one year" - on the basis that there's "little reason to believe" May's deal will be approved by then.

It's difficult to say how markets will react to any decision. If it's a long extension, that could be positive for GBP; if May gets her way, that could also be positive. Meanwhile, an extension of sorts is priced in, but the length of what's priced in is difficult to ascertain. What we do know is that it all points to the potential for volatility this afternoon, this evening, early tomorrow morning - whenever we get more detail on the EU's decision.

Meanwhile, UK GDP is released this morning and we may get some reaction depending on the headline number, but of course this data release will be overshadowed by something much much bigger.

Key Movers

Equity markets were pressured lower yesterday as the IMF cut the 2019 global growth outlook to 3.3% from 3.5%, citing US-China trade disputes and Brexit. Sentiment wasn't helped by President Trump's earlier threats to impose further tariffs on EU imports. The dollar was generally unchanged on the day yesterday, however.

Other than the EU summit, focus will also be on US CPI and FOMC minutes, the latter due for release this evening. The ECB are also due to make their monetary policy announcement, where expectations are tilted towards a somewhat dovish message from the central bank.

Expected Ranges

GBP/USD: 1.2965 - 1.3240 ▲

GBP/EUR: 1.1515 - 1.1760 ▲

GBP/AUD: 1.8100 - 1.8440 ▲

GBP/NZD: 1.9100 - 1.9590 ▲

GBP/CAD: 1.7200 - 1.7650 ▲