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May leaves, and the Brexit case lives: in the EU, they are talking about a new postponement
June 7, 2019 4:21 pmVideo
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Today, Theresa May is leaving the post of leader of the Conservative Party, fulfilling her promise, announced at the end of May. However, for the time being, she has lost only her political position – until the moment when her successor is determined, May will serve as the acting Prime Minister of Britain. The pound played this fact two weeks ago, so today it calmly and phlegmatically reacted to predictable changes. Traders are now concerned about another question: who will replace May and how will he (or she) build relations with Brussels, taking into account the coming “X hour” on October 31? Despite the summer period, the political struggle is in full swing, although the election campaign will officially begin only three days after the resignation of the Prime Minister from the post of leader of the ruling party, that is, on June 10.
Nevertheless, there are already unconditional favorites of the political race and obvious outsiders. Among the first – Boris Johnson and Dominic Raab. They take a rather tough position on further relations with Europe and allow the option of “hard” Brexit. In addition, they oppose the extension of the negotiation period after October 31. In particular, Johnson has repeatedly stated in his speeches that the country will, in any case, withdraw from the Alliance on the last day of October – with or without a deal. This fact has a strong background pressure on the GBP/USD pair – even taking into account the weakening dollar, the price fluctuates in the range of 25-27 figures.
However, the question of a possible (next) delay is being discussed now, despite Johnson’s categorical stance on this matter. Both in Europe and Britain understand that the most likely candidates for the Prime Minister’s post are not ready to make significant concessions to Europeans, while the Europeans themselves refuse in principle to revise the terms of the agreed deal. That is, in the autumn, the situation will again go into a political impasse, where there are two ways out: either a hard Brexit or a new delay.
Johnson’s pre-election bragging about being ready for a chaotic scenario can be replaced by a certain caution when it comes directly to the implementation of this option. Theresa May once say in the same way that “the absence of a deal is better than a bad deal”, but in the end, she did not dare to send the country down the slope by hard Brexit. And there are not so many “hawks” in the Parliament who are ready to admit such an option – the results of the signal votes that were held at the beginning of this year, eloquently testify to this. That is why experts are now discussing a burning question: how long will Britain be in limbo, and how long the European Union agrees to tolerate the British under its wing.
According to the British press, most EU governments believe that Britain should leave the Alliance no later than June 2020. This is due to the fact that next summer, the EU will discuss a 7-year budget plan. Until January 1, 2021, all key authorities of the European Union must finally accept and approve this document.
However, not all EU countries are ready to provide such a long delay. Initially, the Germans opposed this option. Members of the Bundestag said that Germany will veto another Brexit delay if Britain does not hold a general election or a second referendum. Immediately, it is worth noting that neither Johnson nor Raab will not agree to the implementation of this ultimatum. Another country of the European Union – France – voiced the same conditions, however, in a somewhat veiled form. French President Emmanuel Macron recently said that the deadline is the deadline for the implementation of Brexit, and he personally opposed the provision of any new delays.
Here, it should be emphasized that such harsh public statements by politicians of the first-tier cannot be taken at face value. Such threats and ultimatums have been heard before. The purpose of this rhetoric – to spur British politicians to action and increase the pressure on them. Although in fact, the British and Europeans believe hard Brexit to be “economic suicide”.
So, according to one influential British newspaper, in fact, the European Union is ready to give London a new delay if the British authorities cannot approve the terms of the transaction until October 31. As assured journalists of their information sources, at least 25 EU member states agree to provide the country with such an opportunity.
This publication today provided support to the British currency – the GBP/USD pair was able to gain a foothold in the 27th figure. Although the information is unofficial, the market decided that “there is no smoke without fire”. By the way, such rumors find a response among British politicians. In particular, the candidate for the post of leader of the Conservative party (and thus the Prime Minister) Michael Gove yesterday told Cabinet members that he was ready to postpone Brexit from October this year until the end of next year. Gove is not a favorite of the political race, so the pound actually ignored his words. But if such an idea is expressed by Boris Johnson (or Raab), the British currency will get a reason for a more significant correction – up to the level of 1.2860, where the upper line of the Bollinger Bands indicator on the daily chart coincides with the Kijun-Sen line.
The material has been provided by InstaForex Company – www.instaforex.com
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