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Super Thursday for the pound: the main events will take place not in London, but in Brussels

The pound against the dollar was not expected to remain within the 30th figure, although the downward dynamics also did not get its continuation. Traders still maintain some optimism about Brexit, and this fact holds restrains the GBP/USD from an avalanche-like decline. Tomorrow may trigger additional volatility for the pair, as the pound will react to the results of the event-rich day.

So, tomorrow, the so-called "super-Thursday" is expected: several important events will take place within one day - the Bank of England meeting, the quarterly report on inflation, the monetary policy summary, the Mark Carney press conference, and the publication of market data UK housing agency Halifax. Such a "news jackpot" is relatively rare, so traders are unlikely to ignore it, despite the undeniable priority of the Brexit issue.

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However, these issues can not be separated from each other. Last year, the head of the Bank of England warned of the extremely negative consequences of a hard Brexit. In particular, he said that if Britain withdraws from the EU without a deal, then the country will have to rely on the conditions of the WTO. The head of the English regulator even admitted the likelihood that the monetary policy in this case would be revised in the direction of easing. Since then, Carney's rhetoric has not undergone any fundamental changes. He does not tire of repeating that the prospects for monetary policy depend primarily on the prospects for the negotiation process. Moreover, the transfer of Brexit in this context will not be an acceptable solution, since in this case only a period of uncertainty will be extended. In other words, the English regulator unequivocally associated a further increase in the interest rate with "soft" Brexit, and Mark Carney consistently advocated this causal relationship.

That is why tomorrow's inflation report and monetary policy summary will play a secondary role, and the main focus of GBP/USD traders will be on events in Brussels, where the British Prime Minister will meet tomorrow with European Council Chairman Donald Tusk. This event is of great importance for further dialogue between the EU and Britain, although, judging by the preliminary rhetoric of the parties, no breakthrough should be expected.

Thus, the head of the European Council on Twitter has published a rather strange (as for a politician of this level) post in which he criticized the British leadership. According to him, "a special place has been prepared in hell for those who propagandize the ideas of Brexit, but at the same time do not even have an indicative plan of action of a safe nature." A spokeswoman for Theresa May today commented very sharply on this harsh statement - in his opinion, Donald Tusk is free to choose any expression if it ultimately brings a mutually beneficial result.

In other words, Europe is clearly not committed to constructive dialogue. Many representatives of Brussels voiced the same thesis: the agreement reached is not subject to revision; Brexit's key concern is the Irish border; time limits on backstop excluded; Theresa May has not yet provided realistic suggestions for resolving this problem. Most likely, Tusk will again announce the above theses to the British prime minister. But here it should be noted that Theresa May met with DUP party leader Foster today . The details of this meeting are unknown, but the parties were pleased with its results. Whether politicians have succeeded in working out a new strategy for resolving the Irish problem is an open question, and maybe tomorrow May will comment on the latest developments in this direction.

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It is noteworthy that the pound is losing its position now, not because of bad news on Brexit - but, on the contrary, due to the absence of the usual news flow. Traders are forced to draw certain conclusions on fragmentary comments from politicians and controversial insiders of the press. For example, today's correction of the GBP/USD is due to the resonant publication in one of the British newspapers. According to journalists, at a non-advertised meeting, the Cabinet agreed on the option of an 8-week postponement of Brexit. This is a fallback option that can still become the main one - if London and Brussels do not have time to coordinate their positions in time (or if the British Parliament does not have time to approve the necessary legislative acts in time to complement the main deal). In this case, the new likely deadline will be May 24th.

And although this information is unverified (and May, in a public plane, rejects the idea of moving Brexit), the pound stopped its decline and even grew to the level of 1.2980. This suggests that even minimal (and unverified) hints of "soft" Brexit can provide substantial support to the British currency. Consequently, if, despite all the preliminary predictions, the parties will demonstrate their intention to find a compromise tomorrow, then the GBP/USD pair will not only return to the area of 30 figures, but also update the annual price highs. All other events of "super-Thursday" will remain in the background of the general fundamental picture.

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