The prospect of concluding an agreement on the terms of the UK's exit from the European Union, which loomed on the horizon, allowed the GBP / USD pair to soar by more than 5% in two weeks. However, due to the refusal of the British Parliament to consider the option of an accelerated deal presented by the Prime Minister of the country, Boris Johnson, the risks of a pound reversal began to shift to "bearish" territory. Moreover, the fact that the chances of implementing a "hard" Brexit are minimal since the 2016 referendum indicates a limited potential for a decline in GBP / USD.
It can be recalled that B. Johnson managed to do the almost impossible - to agree with Brussels on the Irish border. In addition, the House of Commons approved a draft agreement for the first time on the UK's exit from the EU in general terms. However, parliamentarians considered that the three days proposed by the prime minister for the full approval of the deal would not be enough. This automatically launched a procedure for the extension of Article 50 of the Lisbon Treaty. Thus, the EU is ready to give Britain a three-month deferral of Brexit.
Meanwhile, Goldman Sachs experts believe that the issue of the release of Misty Albion from the alliance will be resolved within three to four weeks, which ultimately will cause a rally of the pound in the direction of $ 1.35.
In the meantime, B. Johnson is dreaming of holding early parliamentary elections. According to the British prime minister, the confident victory of the conservatives will allow him to implement his plan for Brexit.
According to recent polls, the Tory rating has risen to 32–37%, while Labor is gaining 22–24%.
It is paradoxical, but a fact: the head of government suffers one defeat after another in the House of Commons, has lost the majority, and the popularity of conservatives is growing in the country. According to experts, the conservative's strong support is associated with their reputation as a real "party in power", which can be entrusted with running the country without fear of shocks, imposing new taxes or irresponsible spending, unlike the Labor with their social assistance programs and the nationalization of certain sectors of the economy.
In addition, potential supporters of the Labor Party are also alarmed by their half-hearted position on Britain's exit from the EU - they seem to be against it, but they also want to respect the "will of the people". Moreover, the party itself has both a pro-European wing and the so-called "Brexiters". Last week, 19 Labor deputies voted in favor of a draft deal by B. Johnson, contrary to the call of party leader Jeremy Corbyn.
Thus, a convincing victory for the Labor Party in the upcoming elections is not yet in sight.
However, they can bet on a coalition combination, the probability of which is theoretically possible if the Liberal Democrats make a powerful breakthrough and the Scottish National Party seriously strengthens their positions. In this case, there may be a situation of a "suspended" parliament, that is, without a definite majority, which means that a field for maneuver will arise. Although experts do not exclude the possibility of forming a coalition of Labor with the Scots: at least in terms of socio-economic positions, the parties are close. After then, J. Corbyn will have a chance to become prime minister.
After several weeks of rapid rally, the GBP/USD pair may be stuck in the range of 1.275-1.32 against the backdrop of continued uncertainty around Brexit. At the same time, a drop in quotations in the direction of the lower boundary of the specified range will create a good opportunity for the formation of long positions on the pound. However, the main risk for this scenario is the early parliamentary elections in the UK.
The material has been provided by InstaForex Company - www.instaforex.com