GBP/USD. Keep Calm and Carry On

The pound-dollar pair today shows increased volatility: rising to 1.2824, it collapsed to the bottom of the 27th figure in the second half of the day, breaking more than a hundred points in a short period of time. The initial growth of the pair is explained by the uncertainty of the dollar at the beginning of the trading day – the trade war between the US and China was put on pause, and this fact put some pressure on the US currency due to the renewed risk appetite.

However, in the second half of the day the situation has changed dramatically. The G20 meeting was left behind, and the prospect of the US-China truce is still too elusive – so traders quickly switched to other fundamental factors. And if the European currency is worried about the fiscal issue, the pound is preoccupied with the theme of Brexit.

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Just over a week left before the historic vote in the British Parliament, where MPs must support or reject the deal with Brussels. The parliamentary debate should begin even earlier – on December 5, that is, the day after tomorrow. The closer the x-hour is, the more traders react to the accompanying news background. Especially since Theresa May's opponents are increasing their pressure every day, provoking volatility in the market.

Another round of confrontation is associated with closed government documents that contain expert assessments of the approved Brexit agreement. Labour demanded that these documents be handed over to them so that they could assess the legal consequences of the deal. The deputies voiced these demands in an ultimatum: if Theresa May does not fulfill them, they threatened an open confrontation between the government and Parliament.

The leader of the Labor Party said that the prime minister's behavior would be qualified as an obstacle to the work of the Lower House. In such cases, the Parliament conducts a rather long procedure of investigation: first, the deputies vote for the need to conduct an investigation, then the issue is considered by a specially created committee, and then the parliamentarians decide on the application of disciplinary sanctions against the perpetrators (if any will be established during the investigation). Disciplinary measures include dismissal, so violators can pay with their posts.

In addition to the above requirements, the Labour Party warned that in case of failure of the vote for the deal, the Parliament should put the issue of a vote of no confidence in the prime minister. In their opinion, such a step is consistent and logical – because, according to Theresa May herself, she will not be able to achieve a better proposal from the EU.

Representatives of the Conservative party (among those who support May) are trying to contain the pressure. Regarding closed documents, they said that all the obligations of the government to the deputies will be met: the document on the legal position of Brexit will be provided to parliamentarians just today, and Attorney General Jeffrey Cox will additionally announce his position in the parliament.

Also, the conservatives categorically exclude the possibility of holding a second referendum, which has recently been discussed by Labour and some party members of May. The prime minister said that such a scenario can be put on one scale with chaotic Brexit.

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By the way, even Labour can not answer the key questions about the second referendum – for example, what then to do with the law, which obliges Britain to withdraw from the EU on March 29, 2019? And if the British re-agree to Brexit - from what stage to start negotiations with Brussels, if the Europeans are categorically against revising the agreements reached? And there are a lot of such questions, most of them – without an answer. That is why the pound is so sensitive to the statements of those politicians who allow the possibility of a repeated plebiscite.

In my opinion, traders are now too emotional about certain statements, which, as a rule, are "information husk". For example, Theresa May has experienced several internal riots, but they all ended in nothing: the initiators incorrectly assess their strength and the potential number of their supporters. At least over the past year, the instigators have failed to collect 48 signatures of their number of 315 conservative MPs to launch a vote of no confidence.

Naturally, the Labour Party has its own plans to "seize power" peacefully and legally, and without early elections: they want to create a so-called "minority government", with the support of the Liberal Democrats and the Scottish National Party. But for this, the Parliament must vote for a vote of no confidence in the current prime minister. As practice shows in recent months, this is extremely unlikely.

Thus, if we discard the unreasonable and unlikely assumptions, the main question remains: can Theresa May find votes among the Labour Party and his opponents within the Conservative party? All other factors (vote of no confidence, possible resignation, parliamentary investigations, etc.) have no practical sense, but at the same time put pressure on traders.

In the conditions of such chaotic fundamental background, we can only advise traders to remain calm and a balanced approach to trading pairs with the participation of the pound. For example, today in just a few hours the pound/dollar pair collapsed to the monthly lows and recovered almost to the level of today's opening. Such "British hills" will chase a few more weeks – until 11 December.

The material has been provided by InstaForex Company - www.instaforex.com