29.03.201909:08 Forex Analysis & Reviews: Current situation in Brexit: confusion and vacillation

Yesterday, the pound against the dollar returned to the base of the 30th figure, responding to the continuing uncertainty about the prospects for Brexit. The situation is becoming more complex and political contradictions are growing, despite the general desire of London to make a deal with Brussels.

The British parliament made it a rule to reject possible scenarios, however, it does not voice any constructive counter-proposals. The latest events have disoriented traders, especially against the background of general trends in the foreign exchange market as the key macro indicators of the leading countries of the world are slowing down and the rhetoric of the Central Banks has noticeably softened. Political uncertainty only worsens the already difficult fundamental picture of the GBP/USD pair.

At the moment, the "operational situation" is as follows: the speaker of the House of Commons of the British Parliament, John Bercow, agreed to hold the third vote on an agreement on the conditions for Britain's exit from the EU today after long negotiations; Although, he refused to do so previously, citing the provisions of the convention, which is more than four hundred years old. According to these rules, parliamentarians cannot re-examine the same question if its essence has not been changed in any way. The deputies found a way out as they proposed to exclude from the package a political declaration agreed with Europe, in which the parties indicate their future relationship. In other words, the question that is relevant "here and now" given that the deal on the country's withdrawal from the Alliance should be put to the vote in order to formally move the deadline for leaving the EU until May 22.

On the one hand, this is very positive news, which in theory was supposed to support the British currency. Yet, the pound reacted rather phlegmatically, rising only 30-40 points this morning. Such a reaction is fully justified since the fate of the deal is still in limbo as is the fact of today's vote.

Late yesterday evening, unofficial information appeared that May would not make a deal for the third vote, despite the consent of the Speaker of the House of Commons. On Friday, approximately at 17:00 London time, only debates on this issue will be held in Parliament, and, possibly, a vote on the draft deal without a political declaration. This information is based on the news story of one of the British TV channels but unofficial. Indirectly, this scenario also confirms the influential American news agency. According to their information, Theresa May does not see the necessary support in parliament, so there will not be a "meaningful vote" today.

Meanwhile, the leader of the lower house of the British parliament, Andrea Leeds, said yesterday that the deputies had only one way to leave the country in a civilized way from the EU until May 22 by the end of March 29 to vote for the government-proposed deal.

Thus, as of yesterday evening, May was not ready to submit a draft agreement to parliament. Moreover, representatives of the unionist party refused to vote for the proposed option, reducing the likelihood of its approval to zero but without the votes of which, the conservatives do not have a majority in the House of Commons. However, the political situation in London is changing so rapidly that the prime minister could enlist over the past night the support of the necessary number of deputies. This is unlikely, but it cannot be ruled out. Therefore, it can still bring surprises today.

In other words, the pound continues to be under the pressure of uncertainty, especially since the market talked about the likelihood of "hard" Brexit once again. But in my opinion, such a scenario is unlikely to come true. Let me remind you that literally the day before yesterday the British parliament rejected the idea of a second referendum and the idea of withdrawing the notice of intention to leave the European Union was not put to a vote at all.

If the deputies do not come to a common denominator in the near future, then London will have to ask for a more substantial temporary delay for at least a year or two. Consequently, Britain will take part in the elections to the European Parliament and will participate in the formation of the budget but negotiations on the deal may have to start over again, especially if May resigns and/or early parliamentary elections take place in the country.

In general, a long delay will have a positive effect on the British currency in view of at least some stability, albeit of a temporary nature. But today we cannot exclude other options, both extremely positive for the pound (approval of the transaction) and extremely negative (the threat of chaotic Brexit). The results of today will allow us to understand which scenario is most likely.