The British currency paired with the dollar reacted rather coolly to the results of the extraordinary summit. Firstly, the summit results were too predictable given the prior rhetoric of key European players and representatives of Britain. Secondly, there was no final decision on Brexit.
Hence, the extraordinary summit of the European Union countries ended as expected: Brussels did not allow the onset of a "hard" Brexit and postponed the release date of Britain and the Alliance. The parties quickly reached a compromise regarding the timing of the transfer. Initially, May asked to transfer Brexit to June 30. In turn, Tusk insisted on a one-year delay. They agreed almost in the middle: the British were given time until October 31.
The delay is "flexible". London may not wait until the end of the allotted time, approving the transaction at any time. In such a case, Brexit will take place on the first day of the month that follows the one on which the transaction will be ratified. By the way, the date of October 31 was chosen not by chance. The next day, that is November 1, the composition of the European Commission will be updated according to the results of the elections to the European Parliament Let me remind you that at the first plenary meeting, the EU parliament elects not only the new chairman but also the president of the European Commission. Later, they approve of the entire composition of the commission. Apparently, the British will be forced to participate in the elections to the European Parliament but Brussels plans to prevent their participation in the functioning of the new EU government. This explains the demand of the Europeans to leave the Alliance before the first day of the last month of autumn.
However, Theresa May does not intend to wait for several months. She initially insisted on a short postponement and did not refuse from her intentions to leave the EU as soon as possible - at least on a public plane. Moreover, she designated the "internal deadline" for May (or rather, until May 22) in order to avoid participation in the European Parliament elections. Also here, we are not only talking about political expediency. The electoral process is quite a costly pleasure and the British will have to pay for it. Considering the existing tension in society, it will be difficult for ordinary citizens to explain on why would Britain join the European Parliament's election campaign if the country decided to leave the Alliance de facto? In other words, the government has plenty of motivational arguments to speed up the negotiation process.
Thus, despite the fact that Britain received an "extra minute" to think about it, this does not mean that the news background regarding Brexit will subside. On the contrary, the focus of attention of traders will shift again to London. Negotiations will resume today, one of which is between the government and labourists and on the other, the government and conservatives. For Theresa May, the date of May 22 is much more important than October 31, since the elections to the European Parliament symbolize the European integration process.
The British currency paired with the dollar reacted rather coolly to the results of the extraordinary summit. although the pair has grown a bit, it was unable to gain a foothold in the framework of the 31st figure, showing a phlegmatic flat. Firstly, the summit results were too predictable, given the prior rhetoric of key European players and representatives of Britain. Secondly, there was no final decision on Brexit. Therefore, there are no reasons for large-scale growth of GBP/USD either. The pair remains in the region of the 30s only because Europe and Britain were able to avoid the implementation of the toughest scenario but this factor is not the driver that allows buyers to organize an attack at least up to the 32nd figure. Moreover, in this case, the downward pullback to the base of the 30th figure is more likely to occur.
It is also worth noting that quite good macroeconomic data came out yesterday in Britain, which remained in the shadow of Brexit. Nevertheless, they should not be ignored, since the English regulator will evaluate the dynamics of the first half of the year at its next meeting. According to published figures, the country's GDP growth slowed to 0.2% in monthly terms, but was at the level of forecasts. In quarterly terms, the indicator remained at the level of last month. Although experts expected a negative trend but the data on the volume of industrial production were better than the predicted values. Thus, in annual terms, the indicator turned out to be above the zero value for the first time since September last year, rose to a minimum of 0.1%. On a monthly basis, a slight decline was recorded from a half-maximum of 0.7% to 0.6%.
If it were not for the Brexit factor, the pound would be able to show a more pronounced reaction to the published figures. However, the GBP/USD pair traders are still forced to monitor the news flow regarding the prospects of the "divorce process". It is this fundamental factor that will soon set the tone in trading the GBP/USD pair.
The material has been provided by InstaForex Company - www.instaforex.com
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