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Time is running out to finalize an agreement on Brexit, 122 days before the UK leaves the EU and the transition period begins, but the FX market still takes into account the smooth exit, the GBP / GBP pair USD still retaining its lowest level of October at 1.2700. Earlier in London, the cable broke below the 1.2800 mark as Premier May began her fight to win votes. The Times noted that the Brexiteers would support the May deal if it gave a resignation date, which is not likely to happen. Parliament should largely reject the Prime Minister's agreement on 11 December.thbut that will not prevent the prime minister from launching a campaign to convince skeptical politicians.
House of Commons key vote on December 11
May will need 320 votes in the 650-seat House of Commons to ratify the Brexit deal, but the current projections, according to the Guardian, have it with only 230 votes in support and 409 against the agreement final.
If the Prime Minister just loses the significant vote, we may see a limited reaction from the market as expectations become more and more based on the belief that a Plan B could be developed. The market is currently considering the failure of this vote on December 11th.
It is possible that the Prime Minister remains resilient and remains in office
A strong defeat could ultimately reach the threshold of the vote of confidence against Ms. May. A leadership challenge is triggered if 48 Conservatives write letters to trigger a vote of no confidence in May. Two weeks ago, Graham Brady, chairman of the so-called party committee in 1922, said he did not receive the 48-member letter. 22 party members have publicly stated to have submitted letters and it is thought that 15 others have submitted their letters discreetly, but the exact total is not known.
Even though we are witnessing a vote of confidence, the Prime Minister could maintain her seat, because there is no obvious replacement or political party with a better plan / strategy for Brexit.
A scenario without agreement always possible
If this agreement or a revised version fails to materialize, it is possible that the government will abandon the talks and focus on securing an uncompromising Brexit. A non-agreement scenario could see the pound falling 5 to 10% against the greenback.
The price action on the GBP / USD weekly chart highlights that the current 3-week slide temporarily meets treatment at 1.2700. If we see another wave of sales, the next level of key support is August 15th.th 1.2661 followed by level 1.2600. If we see freefall cable, the next major support level could come from a Gartley bullish model around the 1.2400 region. On the upside, 1.2850 is the key resistance.
This article is for general information only. This is not an investment advice or a solution for buying or selling securities. Opinions are the authors; not necessarily that of OANDA Corporation or its affiliates, subsidiaries, officers or directors. Leverage trading is high risk and not suitable for all. You could lose all your deposited funds.
With more than 20 years of commercial experience, Ed Moya is a market analyst at OANDA. It produces an up-to-date fundamental analysis of geopolitical events and monetary policies in the United States, Europe, the Middle East and North Africa. During his career, he has worked with some of the world's leading currency brokers and research departments, including Global Forex Trading, FX Solutions and Trading Advantage. Most recently, he worked with TradeTheNews.com, where he provided market analysis on economic data and business information. Based in New York, Ed is a regular guest of several major financial television networks including BNN, CNBC, Fox Business and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya
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