According to analysts from Danske Bank, the European Union and the United Kingdom are likely to agree at next week’s EU summit on a transition period lasting until year-end 2020. “While this is positive, the negotiations on the future relationship are likely to be more complicated”. 

Key Quotes: 

“In the UK, the calendar is filled with interesting data releases and events. The most important event is the EU summit on Thursday and Friday, when the ambition is to formalise the transition deal, with the EU leaders expected to approve the EU’s guidelines for the framework of the future relationship. Based on recent news stories, it seems like an agreement on transition is just around the corner, as only a few issues remain outstanding. In our view, an agreement would be GBP positive but, at the end of the day, a move lower in EUR/GBP depends on the final withdrawal text (also because the transition agreement is conditioned on the final deal).”

“The Bank of England (BoE) is due to hold one of its smaller meetings on Thursday without updated projections or a press conference. We do not expect any major shifts in policy signals, as the BoE has said it will not pre-commit to a hike this time around. We still expect the BoE to hike in May but will look out for CPI inflation and the labour market report due out during the week, as they are important for the timing of the hike.”

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