Brexit in question, the British pound stood
On Tuesday held an important vote in the British Parliament, which risks to be the most resounding defeat of the government in modern history. In December may cancel the event, against the background of sharply negative comments about her plan for Brexit. However, have nowhere to retreat, and the decision must be made tonight. Try to consider the possible reaction of the market.
For several days in a row everything goes to the fact that the plan will be rejected, and therefore focus on how strong will be the future failure. The most likely scenario in which the number of supporters of the current plan will be 100-150 less than the number of opponents. Such an outcome may cause the least severe reaction of the market, leaving the pound close to current levels, i.e. below 1.29.
The most dangerous to the sterling situation will be a resounding victory for the opponents of the plan, with a difference of about 200 votes: this could become a serious blow for the British currency. In this case the GBPUSD may be dropped to levels below 1.24, down to the level of multi-year lows near 1.20, where the couple were at the end of 2016-early 2017, the period of greatest uncertainty around the prospects of Brexit. Politically, the situation is very similar. After such a resounding defeat of the government would mean that the negotiations with the EU will have to restart from the beginning.
It is impossible to exclude and other variant: the defeat will not be as loud, a difference of 60 or less votes. For the markets it will be a signal that the British Parliament is close to signing a compromise agreement.
The upcoming vote is a mini-version of a referendum on Brexit. Especially is wary of the similarity of the dynamics of the pound. As in 2016, he added in the last days before the vote on the speculations surrounding the positive (for the pound and the markets) outcome. However, this false start, then played a malicious joke, in the end only adding to the collapse of the British currency. Those who last opened a buy trade, first closed them, quickly locking in losses.
Today you should pay attention to the important round level. The dip below 1.25, and even more failure under 1.20 – able to drastically increase the sale of sterling to the pending stop orders. The opposite is true: the unexpectedly positive outcome of the vote is able to increase the purchase of the British currency. Rise above 1.30 is likely to support further purchases of sterling and ensure him a long rally, if players decide that the worst is over.