Pound is depressed: May turned away from the Conservatives and could not agree with Labour

The pound updated multi-month lows against the dollar, reaching the middle of the 28th figure. Such a low level that the pair has not seen since February of this year, when the draft deal with the EU was for the third time failed by members of the House of Commons. Now the downward dynamics of GBP/USD is also due to Brexit, whereas contradictory macroeconomic data only aggravate the position of the British currency. The pair's bearish sentiment will continue to dominate, right up until the moment when traders see a real breakthrough in the negotiations between the May government and the Laborites. As of today, there are no signs of such a compromise, although the date of the fourth vote on Brexit is actually determined. This discord worries market participants, which is reflected in the positions of the pound.


Yesterday, May 15, a meeting of the 1922 Committee was set to take place in London - a group of British onservative deputies who are authorized to express a vote of no confidence in the current prime minister. Their second name is "backbenchers", since they do not occupy a single post in the structure of the government, so they can impartially evaluate the actions of its head. To date, members of the Committee can not initiate the resignation of May (she has the appropriate immunity until December), so the essence of this meeting is reduced in another. The deputies expect the prime minister to voluntarily agree to resign as prime minister (naming a specific date of departure), but the Conservatives will support the notorious draft deal with the EU.

On Wednesday, Theresa May was unable to arrive at this meeting, and it was postponed until today. But yesterday it became known that the deal under the conditional name "resignation in exchange for a vote" will not take place. According to British journalists, the prime minister does not intend to leave her post, and she will tell members of the 1922 Committee that this issue will be considered only after the fourth vote on the deal. It is worth noting here that the cabinet of ministers did not determine the exact date of this vote - it is only known that it will take place at the beginning of the summer, from 3 to 9 June.

In other words, May will remain at the helm of Britain until the autumn, as her refusal to announce her resignation before the departure of the House of Commons deputies directly affects the "electoral schedule" of a potential candidate for the post of head of government. Indeed, in this case, conservative deputies simply do not have time to hold the relevant elections before the summer dissolution. So, if May had declared her intentions today, before the start of the holidays, the deputies of the Conservative Party would be able to select candidates for the post of prime minister, after which these candidates would be offered to "ordinary" conservatives. The voting results would have been announced at the Tory congress, which is scheduled for autumn. However, Theresa May's "demarche" destroys this algorithm of events.

All this suggests that May will not be able to enlist the support of those Conservatives who were ready to vote for the approval of the deal in exchange for her resignation. It is likely that the "internal sociological measurements" showed that even in this case, the draft agreement was doomed to failure: in any case, the prime minister would not have gained the necessary number of votes without the support of Labour and the DUP. Apparently, therefore, May did not make advances with her party members, putting her position on the line.

But awareness of this fact does not solve the problem as a whole. Both the "Conservative hawks" and unionists have already managed to declare that they will not vote for the proposed draft deal in June. According to them, the cabinet offers the same theses for the fourth time, although they have already been rejected three times. Consequently, in such circumstances, the fate of the agreement with the EU is in the hands of Labour, who also do not want to meet May.


Formally, the negotiation process is still ongoing, but the accompanying rhetoric of the parties indicates the absence of any progress. So, just yesterday, the Labour Party spokesperson said that differences remain between the negotiators, and the negotiation process "cannot be endless." He also complained that the representatives of May did not offer anything fundamentally new (primarily in the context of the common customs space with the EU), therefore at the moment the draft deal is no different from the February version.

Thus, Brexit prospects look extremely vague today. On the one hand, May did not agree to "exchange" her position in exchange for the votes of the conservatives, on the other hand, she does not make concessions in negotiations with the Laborites. In this case, the date of the fourth vote on the draft deal has already been designated and announced. This step could be an element of pressure on British politicians - but given the background of previous votes, we can conclude that such tactics do not achieve the expected results.

Under the conditions of such uncertainty, the GBP/USD pair will continue to slide downward, at least to the first support level of 1.2810 (the bottom line of the Bollinger Bands indicator on the daily chart). The next support level is at 1.2730 - this is a similar line to the Bollinger Bands, only on the weekly chart.

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