GBP / USD: Drop in treasury yields and the expectation of demonstrative votes in the British Parliament
The GBP/USD pair continues to track the vicissitudes of the "divorce process" between London and Brussels. The plot of the prolonged drama continues to spin: the British never ceases to amaze with a variety of legislative maneuvers.
Hence, the Speaker of the House of Commons did not have time to get the 400-year-old convention out of the sleeve, thereby blocking the third vote on the deal as parliamentarians decided to hold a so-called "demonstrative vote". The results of which are not binding for the government. Meanwhile, Theresa May acknowledged that there are clearly not enough votes in parliament to support the deal, therefore, in any case, it is inappropriate to submit the draft agreement to the parliament at this time. The situation has again come to a standstill, whereas the period allotted by Brussels is gradually expiring and the likelihood of a "hard" Brexit is growing again despite the formal disagreement of the British deputies with this scenario.
However, the results for today can bring some clarity at least in part of what the British Parliament wants. Many criticize the British parliamentarians for simply rejecting the options offered to them, while they do not offer any clear structured alternatives. Today, members of the House of Commons must take the initiative in this regard and show which scenario is acceptable for them.
First of all, let's understand the definition of "exemplary voting" since in the post-Soviet space this procedure is not actually practiced. Although in some CIS parliaments there is a so-called "signaling vote". During this type of voting, deputies demonstrate their attitude towards a number of legislative initiatives so that members of the government have an idea of which draft of the law is viable and which a priori will not be approved. In the context of Brexit, the essence of an exemplary vote boils down to different interpretations of the deal between London and Brussels. Here, it is necessary to immediately make a reservation that the European Union accepts only one option of the transaction, which was approved at the EU summit at the end of last year. However, the British deputies are not embarrassed by this nuance as they continue to insist on changing the agreement.
At the moment, it is not known what particular alternative projects of the transaction are discussed and the essence of the key changes. Obviously, the question of Brexit will be touched upon one way or another since the fate of the Irish border is the cornerstone of the existing problem. In addition, the House of Commons may consider today other options for the development of events, according to the British press. Thus, the deputies will "probe the ground" regarding the country's withdrawal from the EU without a deal, regarding a repeated referendum and the Brexit combined option pertaining to the withdrawal from the Alliance while maintaining British membership in the EU customs union.
I repeat that all the initiatives that have been voted today (whether they are for or against) will not be binding for the government. It is rather a form of pressure from deputies to the prime minister and members of her team. By the way, the May team suffered losses again after expressing their disagreement with the cabinet policy regarding the prospects for Brexit. The deputy foreign minister and the minister for business and industry of the country announced their resignation yesterday. Let me remind you that on the weekend there were rumors that 11 ministers would threaten their resignation at once, forcing May to voluntarily leave his post and even if these rumors were officially denied, the resignation did occur but not in droves though.
During her speech yesterday, Theresa May opposed the holding of a "demonstrative vote," while calling for support for her draft deal. At the same time, the prime minister acknowledged that an alternative decision of the parliament could be "either another form of Brexit or a second referendum.", whereas she categorically rejected the options of "hard Brexit" or "combined version". In other words, today's activity can be a guide for the GBP/USD traders in the context of understanding future prospects, at least in a hypothetical way.
If we talk about the quoted currency, the US dollar of the situation here has not changed much. The results of the March Fed meeting and the nomination of Stephen Moore's "dovish" to the Board of Governors of the Federal Reserve continue to put pressure on the greenback and this pressure has intensified against the background of falling yields on 10-year US government bonds. Yesterday, this figure fell from 2.379% mark, which was the lowest value since December 2017. At the moment, the indicator has suspended its decline and recovered slightly to 2.430% but the overall fundamental background remains depressed.
However, the weakening of the dollar in the context of the GBP/USD pair is secondary. Brexit is still in the spotlight as the results of today's voting may cause strong volatility in the pair, especially if the parliament expresses its readiness to support the "hard" Brexit option or foster the idea of a repeated referendum on the contrary.The material has been provided by InstaForex Company - www.instaforex.com