In rather difficult circumstances, British Prime Minister Boris Johnson managed to do the almost impossible: to solve the dilemma of how to avoid a tight border with Ireland in the name of peace and how to maintain the integrity of a single space of the European Union for the sake of an agreement with the alliance.
Last night, the EU approved the British draft of the Brexit deal. On this news, the GBP / USD pair jumped more than 170 points in a matter of minutes. However, the sale of the pound followed almost immediately, as investors began to assess the chances that this "divorce" agreement would be approved by the British Parliament. Moreover, by the beginning of the American session, the pound lost almost all profit against the dollar, but then traders resumed cautious purchases of the British currency.
"EU countries approved an updated Brexit deal at the Brussels summit," said European Council President Donald Tusk on Thursday.
Now, Boris Johnson will have to compete for the votes in the House of Commons, which is necessary for the conclusion of the deal. Will lawmakers want to risk another three years of deadlock or even a "tough" Brexit? Yes, the prime minister has not yet won a single parliamentary vote, and he lost his majority and faces serious opposition from the opposition. However, the parties have never been so close to agreeing on the conditions of Brexit, and, most likely, the foggy Albion will not succeed in achieving a more favorable proposal from the EU.
It should also be noted that the new draft "divorce" agreement has much in common with Theresa May's plan, and the main difference between them is the approach to the Irish border. B. Johnson's predecessor wanted to leave the whole of Great Britain in the EU customs union, which Brexit supporters fiercely opposed. Johnson's deal does not include a land border, and the EU customs union will leave the entire United Kingdom, with the exception of Northern Ireland, which will have to adhere to EU customs rules and procedures. In fact, this means that the border will be drawn along the Irish Sea.
The Democratic Unionist Party of Northern Ireland (DUP), an ally of the Conservatives in Parliament, said it would not support the new withdrawal agreement.
Labor leader Jeremy Corbyn, in turn, said that the new agreements look much worse than what Theresa May previously reached with the EU. Due to this, his party will not support the renewed agreement in the House of Commons and will vote for a second referendum on Brexit at an emergency meeting on Saturday, October 19.
Meanwhile, other opposition parties in parliament - the Scottish National, Liberal Democratic, Greens, the Party of Wales and the Independent Group for Change - have long stood for a second referendum.
Thus, the pound is waiting for a "super Saturday", in which the British parliament will have to decide whether they support the Johnson deal or not. If they approve the new agreement, then there are two possible scenarios: the parliament will quickly ratify the deal (and the country will leave the EU on October 31), or it will receive a technical delay to agree on the details. The Alliance considers the deal to be a settled issue, therefore, an agreement must be made to postpone Brexit's deadline. Any of these scenarios should lead to the growth of the GBP / USD pair to 1.36 and above. If the House of Commons rejects Johnson's proposal, then a reduction to 1.275 or to 1.26 may follow.
