The British currency is again waiting for the key stage of Brexit: tomorrow the deputies of the House of Commons must vote for a series of amendments, "updating" the initial draft of the deal. In addition, the deputies can move the date of the country's exit from the EU, so that Theresa May has enough time for additional negotiations. And although the prospects for these negotiations look very vague, the probability of a "soft" Brexit is growing every day.
The weekend passed quite calmly, despite the fears of some experts. None of the politicians or officials made "loud" statements that could significantly affect the mood of the market. Therefore, on Monday, the pound/dollar pair opened almost at the level of Friday's closing, that is, at the bottom of the 32nd figure. However, further growth was not possible – traders have accumulated too many questions about tomorrow's events in the British Parliament. And almost all questions remain without clear and precise answers.
So, there are two main scenarios of further developments. The first scenario involves the conclusion of a deal on the basis of an agreement agreed with the EU. Last Monday, the prime minister presented the so-called "plan B", which, in fact, was no different from the original version. Nevertheless, members of Parliament registered amendments to this document for a week, which will be put to the vote tomorrow. Much will depend on the speaker of the House of Commons, who is leading the legislative process, said spokeswoman Theresa May, who is responsible for the process of "choosing" the amendments that will be put on the agenda.
But if we summarize all the proposed ideas, we can narrow the range of possible options to the two most "viable". Although the first option, in which the deputies will support the deal with formal amendments, is frankly unlikely. Representatives of the Democratic Unionist Party said on Friday that they can vote for the draft deal if the May government will make "certain concessions" on the issue of the Irish border. But this position is not the key to success, because in addition to the prime minister, there is also Brussels, which initially stated that it was unacceptable to repeat negotiations. In addition, more than a hundred conservatives voted against the initial draft of the deal – and the support of the DUP makes sense only if May gets absolute support of her party members in Parliament.
The second scenario is more likely. We are talking about the postponement of the country's exit from the EU. On Friday, The speaker of the House of Commons Andrea Leeds said that this decision may be appropriate if "this ensures that the transaction passes through parliament." Although, according to her, the negotiators will need only "a couple of additional weeks", most experts have a different opinion – they are confident that Brexit will be moved to the end of the year. Theresa May is against this, but this nuance will play a secondary role if the risks of a "chaotic" Brexit increase. It is worth noting that Brussels is not against such a scenario. In particular, Austrian Chancellor Sebastian Kurz said that the EU is ready to postpone the date of the country's exit from the EU – but provided that this happens no later than the elections to the European Parliament, which are scheduled for May.
Thus, the market does not expect a "miracle" in the form of an approval of the transaction by tomorrow. The pound keeps afloat only because the Parliament is not interested in the implementation of the "hard" Brexit. And, judging by of rumours, Theresa May is also the enemy of chaotic output without the transaction. Thus, according to the British press, the prime minister at the weekend told the government that she would not allow the UK to leave the European Union without an agreement. May also said that she can not voice this position in the public plane, as it would have a negative impact on the course of negotiations with the European side.
According to other insider information, May is preparing to "conquer Brussels" again. After tomorrow's vote, she will go to Europe to "knock out" legal guarantees regarding the timing of the backstop. The maximum program is to remove this clause from the text of the agreement. The minimum program - the establishment of the terms of this mechanism. Brussels has repeatedly rejected both options, but it is precisely the question of the backstop that, in fact, stands in the way of concluding a deal between London and Brussels.
In summary, it should be noted that the growth of the pound is still unreliable, which is fueled only by an increase in the probability of the delay of Brexit. Nevertheless, the key controversial issues between Britain and the EU have not yet been resolved, so the pound's strengthening can be completed at any time - for example, if Brussels categorically refuses to review any changes in the text of the agreement reached. The closest support level for GBP/USD is the level of 1.3010 - this is the Tenkan-sen line on the daily chart. If the bulls do not keep this target, the pair will again be fixed in the area of 27-29 figures. The resistance level is the mark of 1.3250 - the upper line of the Bollinger Bands on the weekly chart.
The material has been provided by InstaForex Company - www.instaforex.com