British Triangle: Tory, Whigs and Theresa May

Tonight (at about 15:30 London time) Theresa May will again try to convince the British Parliament to support her deal with Brussels. In anticipation of this event, the pound is behaving extremely cautious after a significant decline on Friday. At the end of last week, the pound slumped in a matter of hours by more than a hundred points, as the initial optimism was replaced by habitual pessimism. Today, the mood of traders has not improved: judging by the rhetoric of May's entourage, she does not intend to postpone Brexit's term, not excluding the "hard" scenario.

A new vote on the updated version of the agreement with the European Union will be held in the House of Commons on January 29. But here it is worth noting that the British can demonstrate increased volatility today, that is, until the key moment of the vote. The fact is that many market participants are worried that the government will only make superficial changes to the original version of the agreement, keeping the key points unchanged. Such fears are logically justified - for several days it is simply impossible to prepare an alternative deal, eliminating the positions agreed with the EU. This means that the transaction will retain its design, and all changes will be only of a formal nature.

According to most experts, Theresa May will present a new version of the resolution of the Irish border problem today. This issue is the main stumbling block that impedes the approval of the transaction. Having enlisted the support of the deputies, she will actually go to Brussels with an ultimatum: either the European Union will make concessions, or Brexit will follow the "hard" scenario, without concluding a deal. That is why May categorically rejects the option of postponing Brexit date - in this case, the whole point of the ultimatum of negotiations is lost.

According to available information, the British prime minister will propose to conclude a separate agreement between Britain and Ireland. In this document, the parties will fix the details and terms of the special border regime with Northern Ireland. By and large, we are talking about those legal guarantees from the EU, which have been talked about for so long in the British parliament. It is quite probable that the deputies of the House of Commons will support this scenario - however, it is absolutely impossible to count on the same support from Brussels. First, the Europeans initially stated that they would not revise the agreement reached. Secondly, the idea of London to conclude a bilateral agreement on the border has already been rejected by Ireland.

Therefore, even if the British deputies today support the above proposal of May, the pound can ignore this fact or even react with a decline - after all, this scenario is not viable, given the position of Brussels and Dublin.

But if the House of Commons supports the idea of extending the 50th article of the Lisbon Treaty, then the British currency can demonstrate a strong enough northern impulse. And although the Theresa May government is categorically against this option, this does not mean that it cannot be realized. The previous polls suggest that the prime minister's opponents can, in a fit of unity, take the necessary decisions, regardless of party affiliation.

For example, not only Labour, but some Conservatives also voted for amendments to tax legislation. More than 100 Conservatives voted against the original deal, in unison with the Labour Party. And this is not a complete list of situations when representatives of the Tories find agreement with representatives of Whigs And in this case, they can also vote in harmony, trying, on the one hand, to avoid the chaotic Brexit, and on the other hand, to force May to return to the negotiating table with Brussels.

There is one more scenario, in which the Parliament will gain control over the negotiation process. However, in the context of today, this scenario is unlikely - they can return to it in case of a failed vote on January 29.

Thus, today's statement by the prime minister in the British Parliament will not be formal. Moreover, the presented "Plan B" will make it possible to understand in what direction the subsequent events will develop - either the prime minister will rely on Brussels, or will nevertheless try to convince her party members.

In any case, Brexit continues to be the number one topic for the GBP/USD pair, so you should not focus on the release of tomorrow's data on the growth of the labor market in Britain. Published figures may provide temporary support for the pound (forecasts are mostly optimistic), but the initial reaction may be a trap. Representatives of the Bank of England have repeatedly stated that the prospects of monetary policy directly depend on the prospects of the "divorce process", so macroeconomic data in this context play a secondary role.