On Friday, the pound/dollar pair updated its monthly high, jumping to the middle of the 31st figure. Progress in the Brexit issue provided a strong support for bulls of the pair - the price did not enter the area of the 32nd figure only because it was the end of the trading week. However, this week, buyers of GBP/USD have every chance to repeat an upward attack: the British currency is waiting for important events, both macroeconomic and political.
Traditionally, the topic of Brexit will be in the foreground for GBP/USD traders. In this vein, the most important day of the week is Tuesday – on this day Theresa May should present her plan on the prospects of Britain's membership in the Customs Union of the European Union. According to the British press, the essence of this plan is that London will conclude a temporary customs agreement with Brussels, which will be valid until the next Parliamentary elections – that is, until 2022. In other words, the prime minister will make significant concessions to Labour in exchange for their support in a second vote for the deal with the EU.
It should immediately be noted that this information is unofficial. But the corresponding article was published in one of the most influential newspapers in Britain. Journalists of this publication previously published a reliable insight into the negotiation process between London and Brussels, as well as between Conservatives and Labour. Therefore, this publication should be taken seriously, taking into account the possible consequences. Since the material was published on May 5, that is, on Sunday, already at the opening of trading on Monday, increased volatility is expected not only for the GBP/USD pair, but also in all pairs involving the pound.
By and large, rumors about a compromise between the May government and the Labour Party appeared at the end of last week. But the parties kept secret the essence of the agreements reached - it was only known that May "radically changed her position regarding the customs union." At the same time, official representatives of the parties gave vague comments and only hints confirmed the fact that the situation had finally moved from the dead point. Now it became clear in which direction the further dialogue between the government and the Parliament will move.
The dialogue will be difficult. After all, until recently, Theresa May spoke categorically against the common customs space between the EU and Britain - in any form. And in this, she was supported by many Conservatives, and not only of the most "hawkish" wing. In other words, she can now lose their support, in the hope of finding a quantitative replacement for them among Laborites and other (few) deputy groups. By and large, May had no choice but to seek support among the opposition. When the House of Commons rejected the draft agreement with the European Union for the third time, only 286 deputies supported the prime minister. And although the "gap" was reduced relative to the February meeting, the number of internal opposition members remained too large. In addition, representatives of the Unionist Party, which have a "golden share", did not vote for the deal (the conservatives have no majority in Parliament without their votes). Therefore, further negotiations with their party members had no practical sense.
But a compromise with Labour can lead to the desired result. Indeed, in addition to the issue with the customs union, May also made concessions in other areas. According to journalists, she will agree to the temporary effect of two EU regulations that relate to the turnover of certain goods (the publication does not specify what was exactly mentioned). Also, the Cabinet is ready to fix a separate regulation to ensure Britain with the same protection of workers' rights that exists in the European Union even after Brexit.
Thus, within the next few days, Brexit's long-standing question could get an unexpected outcome. If May gets the preliminary consent of the Labour Party and part of the Conservatives ("collecting" the required number of votes), the prime minister could already make a deal for the fourth vote on Friday. But unlike previous attempts, in this case, the chances for its approval will be quite high – everything will depend on the position of influential conservatives and representatives of other deputy groups.
In the context of the upcoming political battles, it is worth noting one important fact. According to the results of the local elections (which were held last week in England and Northern Ireland), the Conservative Party of Great Britain lost more than 1.3 thousand seats (a total of 8.4 thousand), losing control over 49 local councils out of 248. for the Labour Party, they were also disappointing: they lost 6 local councils and 86 deputies. Both parties associate such a negative result with Brexit, namely with a long-term period of uncertainty. It is possible that the deplorable results of the local elections also "brought together" political rivals. Whether it will affect the general vote on the deal - time will tell. We will find out the preliminary positions of the British MPs on Tuesday.
The material has been provided by InstaForex Company - www.instaforex.com