Agreed? the pound grows on rumors around Brexit

After a few weeks of lull, the topic of Brexit once again emerged. The information vacuum formed around this topic put quite a lot of pressure on the pound. Traders reacted to a wide variety of rumors regarding the prospects of the "divorce process." Most of them were negative, so over the past two weeks, the GBP/USD pair systematically tumbled, dropping from the 31st figure to the mid-28th. But now the bulls of the pair are actively restoring their positions: traders once again have hope for a "soft" Brexit.


However, at the moment there is no specific information - at least officially. Investor optimism is due to news from one of the influential newspapers in Britain. According to insider information from journalists, Theresa May's cabinet ministers have achieved some success in negotiations with the Labour party. These negotiations started a month ago, on the eve of the next EU summit. Theresa May assured the Europeans that she could find a common language with her opponents and convince them to support the deal with Brussels.

Since then, there has been no news regarding the effectiveness of this dialogue. But according to the source of the newspaper, this time, the parties were not idle and tried to find a common denominator. According to preliminary data, they managed to get the situation off the ground. As one of the Laborites, who is familiar with the negotiations, assures, members of the British government finally showed flexibility by changing their position on the UK customs union with the EU. If earlier Theresa May in categorical form rejected the possibility of creating this union, now such a scenario is one of the probable ones. In addition, according to Labour, the British prime minister agreed to implement the revised text of the political declaration of Britain and the EU into the system of national legislation. This is one more step for the UK's civil exit from the EU.

All of the above information is unofficial, so it must be treated with some caution. However, official comments are also very optimistic. Today, a Labour spokesman announced that the Cabinet has really changed its approach to the prospects for Brexit. He clarified that at the moment there are no joint decisions, but the parties will meet again next week to continue the negotiation process. But Theresa May's spokesman left vague comments on the situation. He said that members of the government "would like to see progress" in negotiations with the opposition. He also added that the deal agreed with Brussels guarantees the country the advantages of a customs union with the additional possibility of an independent trade policy. These words from May's representative can be interpreted differently, but traders prefer to hope for the best, ignoring the alarming signals.

In general, according to the British press, Theresa May plans to go to the polls next week, despite the fact that Brussels agreed to a delay until October 31. Such a rush on the part of the British prime minister is quite explicable and justified.


Let me remind you that at the start of the negotiation process, Theresa May set an "internal deadline" until the end of May, so as not to take part in the elections to the European Parliament. The prime minister's motives lie on the surface: firstly, participation in these elections looks, to put it mildly, ridiculous: Britain, on the one hand, declares its intention to "just about" leave the EU, on the other hand, takes part in the formation of the legislative body of the Alliance. Secondly, the European elections are quite a costly event. In other words, the British will have to pay from their own pockets for politically useless elections - only because the Theresa May government (and the conservatives associated with it) cannot put an end to the negotiation process. Here it is worth noting that the Conservative Party's rating has been steadily declining: recent polls do not promise anything good to the Conservatives. If the elections were held today, the Tories would have suffered a crushing defeat, losing power to the Labour Party.

Thus, Theresa May's sudden flexibility is due to weighty political arguments. Given the official comments of the Labour Party, it can be concluded that the rumors about the prospects of the negotiation process are not far from the truth. This means that the pound will soon receive a reason for large-scale growth.

However, in this case one should not rush to trade decisions. Today, Theresa May has a rather busy day: she will speak in the House of Commons, then she will speak to the chairman of Parliamentary committees, and then hold a government meeting. As a result of these events, the market will receive relevant information - confirming or refuting. If on the horizon the likelihood of approval of the notorious deal really appears, the GBP/USD pair will easily overcome the first resistance level of 1.3160 (upper Kumo cloud border, coinciding with the Bollinger Bands line on the daily chart), heading to the next resistance level of 1.3340 (upper line Bollinger Bands on the weekly chart).

The material has been provided by InstaForex Company -