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Calm before the storm: the pound in anticipation of Parliamentary battles

British Prime Minister Theresa May, and with it the pound, were able to contain a huge onslaught without succumbing to a barrage of criticism during the previous week. The head of government did not resign, and the British currency remained within the limits of the 27-28 figures.

The "house of cards" did not crumble, despite the resignations – moreover, the minister of environment, who also planned to leave his post, suddenly changed his mind, saying that he supports the actions of the prime minister. The post of Dominic Raab - chief negotiator from Britain - was vacant for just a day and a half: last Thursday, as May appointed former Deputy Minister of Health and Social Care Stephen Barkley to this position. He is a consistent supporter of Brexit, in particular, two years ago, by his own admission, he voted for the country's exit from the EU.

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In other words, the design of the current government was able to show its resilience, which means that hopes for a "soft" Brexit remain. Although there are still some political risks: today the Lower House of the British Parliament received a petition for a vote of no confidence in the Prime Minister. "Hawks" among the Conservatives began to collect signatures last week – and it is still unknown whether they managed to find 48 supporters or not (that's how many signatures are needed to start the procedure). In her Sunday interview, Theresa May said that, according to her information, there is no necessary amount. Insider sources of the British press indirectly confirm May's information – according to them, her opponents were able to collect only 42 signatures. By and large, the case is only in six deputies, so the intrigue in this matter remains.

However, the very fact that the procedure is being launched will play an emotional role rather than a "practical" one. To declare a vote of no confidence in the prime minister, the Tories need to enlist the support of the majority of the 316 deputies from the Conservative party. According to experts, the internal party opposition simply does not have such a large number of supporters, so this is a losing initiative. But if conservatives can't even run the corresponding procedure, it will speak about the support of May from the deputies. Although this support is rather forced, it is not so important in the context of the foreign exchange market. The approval of the transaction by the Parliament is at stake, a few traders are interested in what way the prime minister will convince the deputies to support it. The result is important.

As Theresa May herself admitted, the next seven days will be especially difficult for the country. By and large, this is a key stage of Brexit – if the deputies still approve the agreement, the probability of a deal will increase as much as possible, given the volume of concessions to Brussels from London. According to the majority of experts, the approved deal is based mainly on EU conditions – therefore, if it is approved by the British parliamentarians, there should be no delays on the part of the Alliance.

All this means that the pound in the coming days will again live in the information hype about the presence/absence of the required number of votes. All other fundamental factors will play a secondary role, although important events are expected this week.

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In particular, the Bank of England's parliamentary hearings on inflation will be held tomorrow. I would like to remind you that the British central bank must report to the Parliament every three months on inflation and the prospects of monetary policy. These hearings are attended not only by the head of the British central bank, but also by other members of the monetary committee. For example, the participation of five officials for tomorrow was announced, in addition to Mark Carney and his deputies.

As a rule, traders closely monitor this event, as it allows you to get a kind of insider perspective on the further actions of the regulator. The inflation report includes not only an overview of the current situation, but also a forecast for a certain time period – medium and long-term. A positive assessment of inflation prospects could increase the likelihood of tightening monetary policy, given the dynamics of the consumer price index this year. But in this case we have to speak in a subjunctive mood, because at the moment the prospects of monetary policy depend mainly not on the dynamics of inflation, but on the fate of Brexit. If a deal is concluded, the interest rate will probably be increased in the first half of next year – the market has little doubt about this. Otherwise, the mirror option is not excluded: Mark Carney recently admitted the probability of a rate reduction in the case of a chaotic Brexit.

Thus, it is not necessary to build illusions about the impact of macroeconomic factors or comments of members of the English regulator. In the near future, all the attention of traders will be focused on the parliamentary battles, the results of which will allow is to build long-term plans for the prospects of the British currency.

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