The main event of the day is a historic vote in the British Parliament, where deputies will make their verdict on the proposed deal. Most experts and currency strategists talk about the high probability of Theresa May being defeated, despite certain optimistic signals. According to the already established "tradition", on the eve of a key event on the market, numerous rumors appeared that often contradicted each other: some sources said that the most influential members of the Conservative Party decided to support the deal, while other insiders assured journalists the opposite. Considering the whole background of the issue, skepticism still prevails in the market, which, however, does not prevent the pound from keeping within the 28th figure.
The British currency yesterday received an impulse for its growth on two facts. First, according to many sources, some opponents of Theresa May (among the Conservatives) began to doubt their position, and, therefore, today can vote for the approval of the agreement. This is a parliamentary association of eurosceptics-Conservatives (European Research Group), which includes almost 50 deputies. The problem is that there is no consolidated position among them: even if one of the influential representatives of this group decided to support the deal, this does not mean that May can count on the approval of all the others. Nevertheless, the market jumped at such rumors, after which the demand for British currency increased.
In addition, the pound received some support from Brussels, however, in my opinion - of a very dubious nature. The fact is that the European Union sent an open letter to the British parliament yesterday, explaining its approach to Brexit's main unresolved problem - the regime for controlling the border between Ireland and Northern Ireland after the country's withdrawal from the Alliance. The letter did not have the main thing - not even a hint of the provision of legal guarantees to Britain regarding the time frame of the backstop. Brussels limited itself to the phrase that the European Union would not use this regime "beyond the strictly necessary period". This is a rather vague wording, which, among other things, has no legal force. Also, the European Union has once again confirmed that it is ready to extend the transitional period so that the parties could have time to prepare a mutually beneficial agreement on future cooperation.
Yesterday, Theresa May "presented" the EU's appeal to the British Parliament and again tried to convince the deputies that there was no alternative to the proposed deal. In addition, she somewhat tightened her rhetoric, stating that in the event of a failed vote, Brexit might not take place, and the country would "fall apart" due to a severe political crisis.
Despite all the above factors, almost everyone in the market is confident that the deal in its current form will not find support among the majority of British deputies. Therefore, we are not discussing the probability of victory/defeat, but the possible scale of today's defeat. So, according to analysts, if the number of opponents of the deal will exceed 100-120 deputies, the May government is likely to resign (as an alternative – Labour will put to the vote a vote of no confidence in the prime minister). If the number of opponents fluctuates around 20-50, the government will still have a chance to approve the deal during the second vote.
Let me remind you that according to the recently adopted norm, the Cabinet of Ministers should provide the Parliament with a "plan B" within three days, that is, a new plan for the country's exit from the EU. If the transaction undergoes significant changes, then Brexit will still have to be postponed for several months in order for London to coordinate the innovations with Brussels. And although May is categorically against postponing the "deadline", in this case there will be no choice - either a chaotic scenario or a postponement of the release date. By the way, this is one of the most problematic options, as the European Union has repeatedly stated that it is not set to revise the agreement reached and sit down at the negotiating table again.
There are two more scenarios, the implementation of which cannot be excluded. These are early parliamentary elections and a new referendum. By the way, according to a number of experts, Theresa May herself can initiate early elections if the deputies do not support the proposed deal en masse. If the prime minister's proposal is supported by two-thirds of the Parliament, the country enters a new election, while Brexit date will probably be postponed to a later date (July or September). The "sub-item" of this scenario is the option of announcing a vote of no confidence in the prime minister. Laborites have long been threatening to put this question to the vote - literally last weekend, the party leader said that "this will take place very soon." Most likely - right after a failed vote or after disapproval of "Plan B".
It is worth noting that if the Cabinet of Ministers will be suspicious, then there are also several scenarios. Over the next two weeks, the Parliament should (or rather, can) express confidence in the alternative composition of the government proposed by the Conservatives (in other words, only the replacement of the prime minister, but not of the cabinet ministers). If this does not happen, then special elections will be scheduled, which will be held no earlier than in 25 days. Also, the Parliament may "change its mind" and, within the framework of the aforementioned two weeks, lend confidence to the Theresa May government - then the prime minister will continue her work. There are more unlikely options: a Conservative minority government (but with a different prime minister), a coalition government, or a government formed by the Labour Party.
Well, in the end - a new referendum. This option was categorically rejected by Theresa May, but if the government is dismissed, her opinion will be advisory in nature. It is worth noting that a repeated referendum is quite difficult to justify from a legal point of view: for this, it is necessary to make changes to several laws at once (on political parties, elections, referendum, etc.). In addition, for a new plebiscite, it will require a separate piece of legislation, with the written terms and conditions. At the moment, this is the most unlikely option, although it cannot be excluded.
Thus, today for many traders there will be a sleepless night. At about 6:00 pm (London time) Theresa May will speak in the British parliament with a "parting word", followed by discussion and voting for the draft transaction. It is difficult to say under what scenario further events will develop - each of the above options has the right to life.
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