GBP / USD. Pound does not believe in "soft" Brexit

After the turbulent events of the past week, the financial world froze in anticipation. In early December, it will become clear whether the market will return to a state of relative stability or global uncertainty will continue further, defining the corresponding prospects for 2019. Given such an eventual fork, any prediction of currency strategists somehow comes down either to Brexit or to US-China trade relations. In the case of the pound-dollar pair, both topics are relevant - especially now, on the eve of the G20 summit and the key vote in the British parliament.

Brexit has an unconditional priority for the pound - all other fundamental factors are of secondary importance. These may affect the dynamics of the currency only if an information vacuum is temporarily created around the "main" theme. Recently, there are practically no such periods: the prospects for the most important voting are spoken daily, the most diverse speakers - from political scientists to the leaders of British political parties.


The disposition at the moment is as follows : there are 650 deputies in the British parliament. Meanwhile, the prime minister needs 320 votes in favor in order for the deal to pass through the millstones of the House of Commons. The complexity of the situation lies in the fact that, after the extraordinary re-election, the conservatives have lost the majority - now they are only left with 316 votes. In this regard, they entered into a coalition alliance with the Democratic Unionist Party (DUP), 10 deputies of which has provided control over parliament to conservatives. Theoretically, Theresa May has the necessary number of votes. However, in practice, the situation is completely different. Unionists have already managed to declare that they will not vote for the draft deal: a similar statement was made by the representatives of the Labor party and the Scottish National Party.

True, in each case that they did not manage to gain the necessary number ( 48) of supporters - but from this, it can be concluded that the backbone of the inner-party opposition is about three dozen deputies. Overwhelmingly, they are supporters of a more "rigid" Brexit. In their opinion, Theresa May gave in to the pressure of Brussels and allowed too many concessions to the Europeans. And although the number of opponents among conservatives can vary, the prime minister does not have to rely on the monolithic support of party members.

This means that Theresa May needs to do the almost impossible: to win over the representatives of the Labor Party to her side. It is worth noting that among the Laborites, there are also supporters of Brexit, however, it is in their interpretation, which provides for maximum cooperation with the European Union. Even when the possibility of early elections was discussed in London, Labor declared that Brexit would take place anyway if he won, but under different conditions.

According to experts, Theresa May will seek support from those Labor Party deputies who, on the one hand, are in favor of the country's withdrawal from the EU, and on the other hand, are satisfied with the formula for further cooperation with Brussels. Also, the prime minister will continue to put pressure on his party members, emphasizing the lack of an alternative to the achieved deal. Rather, the only alternative in this case is the chaotic Brexit, the negative consequences of which have been voiced more than once.

In this way, The British Prime Minister faces a very difficult political task, which may be unsolvable for her. At least, many analysts doubt that she will be able to consolidate the deputies - especially from the two opposing camps. Other experts are confident that the fear of the disordered Brexit will force many parliamentarians to support the deal, despite the flaws that have been declared. Uncertain prospects put a lot of pressure on the pound. Today, a pair of GBP/USD has finally consolidated in the 27th figure, testing a half-week minimum. And the closer the "hour of the X", the stronger the volatility will be for the pair, since the degree of intensity will only increase. In particular, a televised debate between Theresa May and Labor leader Jeremy Corbyn can take place next week. The premier has already confirmed Theresa May's participation in this event. If the head of the government looks unconvincing, then the British currency will again surrender its position, updating all the new price prima.


One must not forget about the quoted currency GBP / USD - dollar. On the eve of the G20 summit, Trump made a rather unfriendly statement about the introduction of new tariffs on Chinese imports - from January 1 of next year. Such rhetoric only increased the importance of the G20 summit, which will begin this Friday. Against the background of increased uncertainty, the American currency is again increasing its position: the dollar index is in the area of 97 points. In other words, the uncertainty of the British currency and the restoration of the greenback determine the southern trend for the pair. The nearest support level is far below the current levels at around 1.2670. This is the bottom line of the Bollinger Bands indicator on the daily chart.

The material has been provided by InstaForex Company -