All the latest rumors and conversations concerning the UK are exclusively related to Boris Johnson, his latest bill "on the internal market of Great Britain", as well as about a possible conflict with the European Union. Traders were completely uninterested in the Bank of England meeting and completely forgot about the failed negotiations between London and Brussels regarding the trade deal. All the attention of traders and also the international community is now focused on the British Parliament, which has already pre-approved the Johnson bill. Thus, most likely, after it has been finalized and corrected, the parliament will also approve and adopt it. There is one very important remark here. Formally, "the parliament will accept it", in fact - "it will be accepted by the Conservative Party", which formed a "majority government", so it does not depend on the opinion of the opposition forces. Therefore, it should be clearly understood that Johnson's law is approved only by Johnson's followers, but not by the opposition, former politicians, former Prime Ministers, and other high-ranking officials. However, at the very beginning of his administration, Johnson quickly made it clear to party members that those who disagree with the party's policies will not be members of this very party. Therefore, there is no doubt that the conservatives are simply afraid of Johnson, thus, they will blindly follow him, approving almost any laws and bills.
The most important thing that the whole world can't understand right now is Boris Johnson's tactics. On the one hand, it seems to be a sign of a good player in the international arena, a good politician and leader. On the other hand, Johnson is just not proven to be a good politician and leader (in our humble opinion). The world community does not understand what Johnson is trying to achieve? His bill, which openly violates the agreement with the European Union, is an attempt to put pressure on the European Union to be more compliant in negotiations on a trade agreement? But then why did this bill "come up" only in mid-September, and not in July, for example, when there was simply more time for further negotiations? Boris Johnson is trying to "spread the straw" in case the European Union does not agree to the terms of London and leaves it without free trade? Johnson himself said that the European Union can apply a "food blockade" and it is for insurance that the bill "on the internal market of Great Britain" is needed. In fact, this bill allows the British government to change, cancel the rules of customs transport on the border between Northern Ireland and England, if London and Brussels do not agree on a trade agreement before January 1. That is, in fact, London has not yet violated any points of the agreement with the European Union on Brexit. The same bill clearly prescribes the supremacy of decisions of the British government. If the second option is true, then Boris Johnson cannot fail to understand that in the event of a real violation of the agreement with the EU, sanctions will inevitably follow, courts will follow, and proceedings that may drag on for many years. And this is not just a trial, there will be consequences. And not only from the European Union, which will act as the affected party. Already, for example, Joe Biden said that if the agreement with the EU is violated, it will greatly complicate negotiations with Washington on a trade deal with the United States. Not to mention the fact that it will be possible to put an end to the trade deal with the European Union, which in theory can be concluded at any time and after January 1, 2021. Thus, it is very difficult to find the goal that Boris Johnson actually pursues.
Or perhaps there is no hidden goal. Perhaps Boris Johnson is simply acting on the principle of Donald Trump, who, if he doesn't get what he wants, begins to pour accusations, begins to openly conflict. Maybe Johnson, not having received a free trade agreement, simply starts openly plotting the EU's machinations. It certainly sounds quite strange, given that we are talking about the highest political circles, however, this option cannot be completely excluded. Moreover, the bill was criticized by everyone who could do it. In other words, almost everyone understands what the consequences will be for Britain if Johnson really goes to violate international law. This is a disgrace to Britain and a blow to its reputation.
Meanwhile, the head of the European Commission, Ursula von der Leyen, said that a deal with London could still be concluded. It cannot be said that after these words of Ursula, the pound soared up, because in the world, in principle, few people believe in the possibility of signing this agreement. "It is better not to be distracted by questioning the existing international agreement that we already have, and focus on achieving it - we have little time," the head of the European Commission said. And, frankly, her words make you wonder if the European Union is going to be saved under Johnson's pressure. Is there some secret trump card in Johnson's sleeve that the EU knows about? Top officials of the European Union regularly stated that London itself fails the negotiations, delays them, does not make concessions when it needs an agreement more. EU leaders have criticized the actions of Boris Johnson, who refused to extend the "transition period" and set deadlines for negotiations on his own. Now it turns out that in the last month of negotiations, "we should not be distracted and focus on reaching an agreement"? It looks very strange, and market participants don't even seem to know how to react to it. In addition, Ms. Von der Leyen called London's demarche "a very unpleasant surprise", although we would call it "arbitrary".
Thus, European leaders have criticized London's actions, but have not yet begun to take any retaliatory actions. In fact, the European Union can now wait for the actual violation of the current agreement and only then start working in this direction. It seems that this bill is another bluff by Boris Johnson, which has so far led to nothing but casting a shadow over the UK. Well, we can only monitor the situation, but it will be extremely difficult for the pound to show growth in the coming weeks or even months. Salvation can only come from across the ocean.
Trading recommendations for the GBP/USD pair:
The pound/dollar pair began to correct after a strong round of downward movement. The pair entered the Ichimoku cloud on the 24-hour timeframe and is now trading inside it. The further fall in the pound depends entirely on the fundamental background of the UK. Overcoming the Senkou Span B line will strengthen the current "dead cross" and increase the probability of continuing the downward movement. Thus, we recommend that you wait until the correction is completed and resume trading downwards with the targets of 1.2832 and 1.2683 after the MACD indicator turns down.