Risk appetite is again on the back burner after President Trump and N. Korea’s Kim failed to make any agreement at the Hanoi summit – the meet was cut short by Trump.

Cautious market sentiment is also being aided by uncertainty over the progress in Sion-U.S trade talks. U.S Trade Representative Lighthizer’s guarded comments this week that increased Chinese purchase of U.S goods is “not enough” to make a trade deal.

On the data front, China’s economic growth continued to slow, albeit the data was influenced by the Lunar New Year holiday. Chinese PMI, the first official gauge for this month, showed activity slumped further, below the 50 mark, that signifies contraction to 49.2, while new export orders also slid. While in Europe, inflation data for February showed small steps of improvement and should help the ECB to achieve its target later in the year.

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Stateside, U.S Q4 GDP came in at +2.6%, better than the +2.2% forecasted by the street, but lower than the +3.4% growth seen in Q3. The miss in the headline is being blamed on the recent U.S government shutdown and the China-U.S trade war.

The reduced risks of a “no-deal” Brexit have helped lift the EUR and GBP this week, however, upside is likely to be relatively contained,” particularly given concerns over eurozone economic weakness and the Brexit final outcome.

Brexit timeline:

Vote on a revised deal (meaningful vote) – By Mar 12

May has promised to bring back a revised deal to parliament and hold a vote on whether to approve it by March 12.

If that fails, MPs will be offered two separate votes:

  • One, on the following day, on whether MPs support a no-deal Brexit – so the UK would “only leave without a deal on 29 March if there is explicit consent in the House for that outcome”
  • If that fails, then MPs will get a vote by 14 March on requesting an extension to the two-year Article 50 negotiation process to delay EU withdrawal beyond 29 March

PM May has indicated that she does not want to see Article 50 extended.

EU SUMMI – Mar 21-22

EU leaders are due to meet in Brussels. This could be an opportunity for an eleventh-hour deal, or it would be the last chance to agree an extension of the Article 50 negotiation period and delay Brexit to avoid no-deal disruption.

Last weekend – Mar 23-24

If a deal is seen as viable at the summit, officials could work through the weekend to nail down the details with a final deal – and a possible extension to June 30 conditional on British parliamentary approval – announced on Sunday, Mar 24-Monday, March 25.

Final week – Mar 25-29

If a deal could be clinched, then the British parliament could vote on it, possibly on March 26. The European Parliament could ratify the deal that week.

Exit Day – Mar 29?

If May does not get a deal approved by parliament by March 29, Britain faces a disorderly exit or may be forced to seek an extension of Article 50 to give more time to reach an agreement. It is not certain the EU would agree to this.

Geopolitical ‘hotspot’

Tensions between Pakistan and India are at their highest point in almost 50 years after Pakistan shot down an Indian military jet flying over the disputed Kashmir territory and India carrying out a pre-emptive strike on a terrorist training camp in Pakistan.

On the Economic Calendar, no releases are scheduled for this weekend.

Market concerns:

• U.K/Brexit fallout
• Sino/U.S – trade & tariffs
• China/Aussie – coal war
• Weaker China data
• Muller/Trump – AG Barr is set to announce the completion of the report
• OPEC, Saudis, Venezuela & Trump
• Geo-political concerns in Russia, Ukraine and France
• India/Pakistan – tension high amongst two nuclear nations
• ‘Twitter Trump’
• U.S debt ceiling worries
• Spanish snap elections expected to be full of surprises April 28

Next week: Reserve Bank of Australia (RBA) monetary policy announcement (Mar 4/5), AUD GDP (Mar 5), CAD Trade balance, Bank of Canada (BoC) rate announcement & AUD retail sales (Mar 6), European Central Bank (ECB) rate announcement (Mar 7), U.S non-farm payrolls (NFP) & CAD employment release (Mar 8)

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