18.12.201812:53 Forex Analysis & Reviews: GBP/USD: the pound agrees to a second referendum

Brexit's topic has left the front pages of European and British publications, but the foreign exchange market closely monitors the development of events on this issue. After a series of unsuccessful attempts to find a compromise, the parties dispersed "at the corners of the ring", apparently - until the middle of January next year. Nevertheless, a heated discussion of possible scenarios still has a serious impact on the pound: the GBP/USD pair practically ignores the American events, fully concentrating on the prospects of the "divorce process". The external struggle has grown into an internal one - the British are again trying to figure out how to get out of the political impasse, where they, in fact, have driven themselves.

The immunity against impeachment that was acquired last week allows Theresa May to feel more or less confident throughout the year: deputies cannot return to this issue during this period. However, this fact did not bring relief to the supporters of the "soft" Brexit. First, May protected herself only from her own party members, while she could still get a vote of no confidence from the entire House of Commons. Secondly, the voting itself made a double impression: on the one hand, the prime minister received the support of the majority of Conservatives, on the other hand, the number of her opponents clearly increased as of late: 117 deputies, that is almost 40%, gave their votes for the announcement of her vote of no confidence. This is a really disappointing fact: in order to approve the deal, Theresa may needs not only the absolute support of party members, but also additional votes – this is evidenced by simple arithmetic.

There are 650 deputies in the House of Commons, 315 of which are Conservatives. That is, to overcome the threshold of a simple majority, the prime minister needs another 10 votes (provided that the Conservatives vote "for" without exception). A temporary ally of the Tories is the Democratic Unionist Party - at the expense of their representatives, the Conservatives have a majority in parliament. But this is in "peaceful" time, whereas now unionists are also categorically opposed to the approval of the deal. The remaining parties represented in the British Parliament - the Scottish National Party, the Liberal Democrats, the Greens and the Party of Wales - are long-time opponents of the Conservatives in general and Theresa May in particular, so it will be extremely difficult for the prime minister to lure them to her side.

Moreover, the European Union last week refused to meet the British, so May didn't have any additional trumps, except as a fact of the catastrophism of the "hard" Brexit. But this circumstance, the opposition is trying to neutralize. In particular, some representatives of the Conservatives are now actively promoting the topic of holding a repeated referendum - they are holding relevant consultations with Labor and other parliamentary factions. Moreover, the British press reported that many of May's allies were holding "separate talks" with supporters of a repeated referendum, seriously considering this idea in the context of its implementation.

Theresa May strongly opposes such a scenario. In her opinion, in this case, the British authorities "will undermine the faith of the people" and demonstrate their incapacity. Speaking in parliament today, she said that it was planned to vote on the draft deal in mid-January, namely on the 14th. In her opinion, the scandalous backstop mechanism will not be" eternal " and may not be necessary at all. May did not clarify any details, so this statement can be interpreted in different ways. One way or another, the leader of the Labor Party once again declared that the representatives of his party would not support the deal.

It is noteworthy that the idea of a repeated referendum, which was announced at the weekend in the British press, found a positive response from traders. For example, before such scenarios put pressure on the pound, as it entailed uncertainty. Now, on the other side of the scale, the "hard" Brexit, so in such conditions a repeated referendum does not look like a catastrophe. By the way, one of the supporters of this idea is the former prime minister of Britain, Tony Blair, who enjoys a certain influence both in Brussels and in London. According to rumors, he recently held informal talks with the European side, thus preparing the ground for the possible implementation of this scenario.

Thus, at the moment there are several scenarios: "hard" Brexit, "soft" Brexit and a repeated referendum. The third option looks like a compromise, but you have to fight for it, taking into account Theresa May's categorical position.

As some experts believe, if this idea is not implemented, then a vote of confidence in the entire House of Commons is possible. According to the head of the Labor Party, his party is ready to initiate this issue, but "at the right moment". It is obvious that the Laborists do not want to repeat the mistake of the Conservatives, who made a "single shot". Their initiative can be supported not only by four opposition parties, but also by some Conservatives (about a hundred) - therefore, this scenario cannot be dismissed. There are 650 deputies in Parliament, while Theresa May can count on the support of only two hundred of them. If the entire House of Commons votes for a vote of no confidence of the government, the representatives of the Conservative Party will have to form a new government or go to early elections.

As you can see, the rates are high - so up to the Catholic Christmas, we can expect increased volatility in the GBP/USD pair. If the rumors of a repeated referendum will increase, then the pound will get support - apparently, the market has come to the conclusion that this is the most optimal final of the two-year divorce epic.