Over the weekend, the news flow regarding the possible prospects of Brexit went off-scale. The media was full of loud headlines that surprised by its diversity. There is a "conspiracy" of ministers against May and the scandal with a 5 million petition against the country's withdrawal from the EU and the accusations of the French president and so on and so forth. The Saturday march against Brexit came about a million Britons according to various estimates, which only added to the overall picture of events.
Despite such a tumultuous weekend, the pound opened the trading week very restrained without a gap. Firstly, the market is no longer responding keenly to the rapidly changing flow of information. Since December, the news background is too saturated and quite contradictory. Secondly, many rumors circulated were almost immediately refuted by official statements and although, as a rule, in such cases, "there is no smoke without fire," official refutations level the initial effect.
For example, the British influential newspaper it was reported on Saturday that 11 ministers would ask Teresa May to resign on Monday. Otherwise, they will resign. The publication even voiced the names of possible successors to the current prime minister, namely the British Foreign Minister Jeremy Hunt, Environment Minister Michael Gove and Chancellor of one of the duchies David Lidington. However, British Finance Minister Philip Hammond denied the information that appeared by Sunday evening, adding that the change of prime minister would not help the situation.
By and large, the position of the Minister of Finance is difficult to refute. Brussels will not resume negotiations with London just because the country will change the head of government. In Europe, they have repeatedly stated this and recent events have only confirmed the firmness of their position. Therefore, the fate of Brexit is now exclusively in the hands of the British Parliament. Theresa May can really resign if at this price she will ensure that the deputies approve the deal. According to another British publication, the prime minister will soon announce his decision to resign immediately after the approval of the deal with the EU.
Deputies also need to take into account the growing discontent among the British. More than 5 million citizens of this country have signed an electronic petition for the preservation of Britain within the EU. This is a record value as the last time such a stir was in 2016, when the British, demanded a referendum on the contrary. Now the situation has turned 180 degrees where hundreds of thousands of people took to the streets of London with the only slogan: "We changed our mind." In other words, the British deputies will not be able to simply "brush off" the problem by showing passivity. In turn, this means that Britain is on the threshold of important and unconventional political decisions that are not amenable to any intelligible forecast. These are the only probable scenarios that can be realized in one form or another.
First option: Theresa May really resigns in exchange for an approved deal. In this case, not only all conservatives need agreement (75 of which did not support the agreement on March 12) but also representatives of the DUP, who are allies of the Tories in parliament. In turn, they are categorically opposed to the conditions proposed by Brussels, regarding the question of backstop above all. In addition, deputies need to vote for the amendment, which allows submitting the draft transaction to a vote. As is known, the Speaker of the House of Commons blocked the third consideration, referring to the convention 400 years ago where according to which, the deputies cannot re-examine the same issue without making any changes. Of course, if May agrees with the Parliament, these questions will be voted as a "package".
Second option: London asks Brussels for a longer-term delay, thereby agreeing to participate in the elections to the European Parliament. This option is opposed by the French, whose opinions have to be considered by the other members of the Alliance. Macron can change his opinion, but today such a variant of the development of an event looks unlikely.
It is also unlikely that the deputies will agree to withdraw from the EU without a deal on April 12. Let me remind you that the House of Commons voted against leaving the country without an agreement on March 29, nor ever at all. On the other hand, parliamentarians may re-vote this issue "derailing the country" but this option looks too incredible, given the previous rhetoric of the majority of deputies.
Thus, there are several options for the development of events and all of them are associated with certain difficulties that can be hypothetically overcome. The pound will react depending on which scenario ultimately comes to life. The delay in any form and the more so the approval of the agreement will have a positive effect on the currency. But if the situation finally reaches a dead end, the GBP/USD pair will at least return to the first support level of 1.2930 (the upper limit of the Kumo cloud on the daily chart) and further to the area of 27-28 figures.
The material has been provided by InstaForex Company - www.instaforex.com