The pound is ready to believe any rumors

The pound is again in the zone of price turbulence. Paired with the dollar this week, it jumped by almost 300 points, reacting to a decrease in the likelihood of a "hard" Brexit. However, the northern dynamics of GBP / USD should be treated with some caution. On the eve of the re-voting, the news background changes with a kaleidoscopic speed, so now you should not trust the impulse movements of the British currency.

Let me remind you that the main support for the pound was on the news that the British Parliament is ready to postpone the Brexit date. And although this information is unconfirmed, many indirect factors speak in favor of this scenario. In particular, at the moment there are two amendments registered in the Parliament, the essence of which is reduced to the transfer of the "X hour" to the end of the current year. It is noteworthy that similar amendments were made by representatives of the Labor Party, as well as the conservative ones.


In the event that the parliament does not approve the draft deal by the end of February, the deputies will take responsibility for the negotiation process, excluding the government from it. Laborists and some conservatives declared that they would support this amendment, as they are confident that on January 29, the second vote will end in repeated failure. The market was inspired by such intentions of parliamentarians, although, by and large, such a scenario does not solve the problem as a whole. Brussels still does not want to meet the British, especially on the key issue of the Irish border.

Moreover, yesterday the pound lost another trump card after the speech of the Bank of England's head Mark Carney. He said that the regulator will return to the process of gradual increase in rates only if Britain leaves the European Union "in a civilized way." Thus, he made it clear that the postponement of Brexit would not open the way to tightening monetary policy since the degree of uncertainty will remain high.

That is why today's rumors about the position of the Democratic Unionist Party have provided such strong support for GBP / USD. The pair tested the 31st figure for the first time since last November. According to the British press, unionists have expressed their readiness to support the draft deal on Tuesday, if the May government will make "certain concessions". It is worth noting here that the DUP has a "golden share" in the British parliament, without the support of their 10 deputies, the conservatives have no majority. Therefore, their position is of great importance in the context of overall prospects for a compromise.

However, the pound was not long at the annual maximums. After the euphoria came to a sober calculation, which cooled the ardor of the bulls of the pair GBP / USD. First, the published information is unofficial. It is an insider of one of the British publications. Secondly, it is necessary to take into account the fact that the representatives of the DUP set a number of conditions regarding the future status of the border with Ireland. These conditions are unlikely to be "cosmetic" in nature, so they will need to be coordinated with the European Union, which, in turn, refuses to show any flexibility in this matter. For example, when Poland proposed to limit the operation of the backstop regime for two years, the main negotiator from the EU took this idea "in hostility", saying that the European Union is not yet ready for such maneuvers in the negotiations.


In addition, Dublin has already managed to declare that Ireland will not make any concessions unless London offers "generous compensation." The EU will most likely support the Irish position and the situation will again be in a negotiating impasse. A spokeswoman for Theresa May just added fuel to the fire, saying that he was not aware of any planned talks with Brussels. And although he acknowledged that the working group is now working on an additional agreement on the back-stop issue, the overall prospects for the deal remain a big question.

Thus, traders of the GBP / USD pair remain optimistic, since the incoming signals indicate that the "hard" Brexit will not be implemented anyway, either they will agree on the deal, or they will postpone the exit date of the country from the EU. Nevertheless, long positions in the GBP / USD pair are unreliable, since all political constructions resemble "castles in the sand". First, the experts' assumptions contain too many "ifs", and secondly, we do not know the opinion of many conservatives and Laborites, who in the end can support or not support the ideas proposed in Parliament. Therefore, today it is better not to open deals for a pair, and open positions as close as possible, since the weekend may give too many unexpected surprises.

The material has been provided by InstaForex Company -