Downing Street is saying that the Prime Minister is planning to hold another, forth, vote in the Parliament in order to find support to pass her notion. For now, the plan is to hold the vote some time during the week starting June 3rd. Unemployment in Australia disappoints by rising 2 tenths of a percent above the expected 5.0%.
Brexit Is Slowly Getting Back into the Spotlight
The cross-party talks between the Conservatives and Labour continued this week. Theresa May is trying to find common grounds with the opposition, but it is a hard task to do, as Labour still disagrees with the proposed deal. One of their arguments now is that Labour finds it difficult negotiate with the government, which is struggling to even agree on matters within its own party. But all this looks like a closed circle, where Mrs May is pushed around in, and it is unlikely that the outcome could be in her favour.
As we all know, the EU has given the United Kingdom a 12-month extension (until October 31st) to leave the EU. The UK has the option to leave earlier, if the British Parliament finally reaches a consensus on the exit plan, which was negotiated by Mrs May with the European Union. But Theresa May keeps hitting strong headwinds, not only from the opposition, but now also from inside of her own party. One Tory MP suggested that the prime minister should resign, as the party is losing faith and trust in Theresa May.
After three rounds of unsuccessful votes to support the deal, Downing Street is saying that the Prime Minister is planning to hold another, forth, vote in the Parliament in order to find support to pass her notion. For now, the plan is to hold the vote some time during the week starting June 3rd. The vote would be on the so-called Withdrawal Agreement Bill (WAB), which is a legally binding part of the Brexit deal, covering the main exit terms. Also, the WAB could allow the the Parliament to have a greater say on the future negotiations with the EU. Although Theresa May is trying hard right now to find support among MPs, so that they would support her legislation, the opposition says that they do not guarantee that they would vote in favour of the bill. If the Prime Minister does not get the result she wants, there are speculations that she might hand in her resignation. That said, yesterday, May’s spokesperson declined to confirm that the prime minister would do exactly that in the case of a bad result from the vote.
Even if the WAB passes through Parliament, it would also be possible to include an amendment, which would force the UK to go back to the EU’s negotiation table and request certain changes to the Withdrawal Agreement if necessary. The question here is how well would that go with the EU itself. Most likely, it wouldn't be a positive response, as the EU have already stated that the agreed deal is non-negotiable. If then, the UK is not able to get things their way, the Brexit process could stall once again. The government would have to seek alternatives and other methods of finding common grounds with MPs. Which is basically, what has been happening till now. In general, if the EU refuses to renegotiate the deal, Britain is left roughly with these options:
- To leave without a deal
- To hold a General election
- Vote of no confidence
- A new referendum
- Or to cancel Brexit
To stir up the mess a bit more, the Conservative leadership election might happen as well. It is unclear when could that be exactly, but probably it could be held after the week commencing June 3rd. And this is when it could become even more unclear what to expect from the whole Brexit outcome.
EUR/GBP – Technical Outlook
EUR/GBP is showing great performance from the beginning of this month. After hitting a support area at 0.8486 on May 5th, the pair reversed 180 degrees and drifted higher, trading above its short-term upside line taken from the low of that day. There is a good chance we may see the rate climbing higher, but given that EUR/GBP is a bit overstretched to the upside on the shorter timeframes, at some point, the pair could correct slightly lower and make its way to the above mentioned upside line for a test. That said, as long as the line remains intact, we will stay positive, at least over the short-term outlook.
A further push higher might overshoot the yesterday’s high and test the 0.8740 barrier, which previously acted as a good area of support on February 8th, 13th, 17th and 18th. This time the area could take the role of resistance and the rate might get a hold-up around there, or even retrace back down a bit. The pair could slide back to the upside support line for a quick test, but if EUR/GBP fails to break below it, this is when the bulls might take advantage of the lower rate and push it up again. If the pair bypasses the 0.8740 obstacle, it might then target the 0.8763 zone, marked by the high of February 19th.
Alternatively, in order to consider a possible change of trend, at leas in the short run, we would like to see a break of the aforementioned upside support line and a rate-drop below the 0.8691 hurdle, marked by Tuesday’s high. This way, EUR/GBP could then fall to the 0.8668 obstacle, a break of which might allow more bears to join in and drive the pair even lower. The next potential target could be the 0.8650 level, marked by the highs of April 29th and May 9th.
AUD/USD – Technical Outlook
AUD/USD continues to drift lower, trading below its short-term downside resistance line taken from the high of April 18th. During the Asian morning today, the pair briefly dropped slightly below the 0.6900 level, to test the 0.6891 zone. But the bulls quickly pushed the rate back up again. That said, the Australian dollar still looks week and even if AUD/USD could travel higher again, as long as it remains below that downside line, we will class any move up as a temporary correction before another leg of selling.
AUD/USD could correct slightly higher, potentially testing the 0.6937 hurdle, marked by yesterday’s intraday swing high. Slightly above that hurdle runs the aforementioned downside line, which may resist the bull-pressure and hold the rate down. If so, the bears might pick up the higher rate and send the pair back down towards the 0.6891 obstacle, a break of which may lead AUD/USD towards the 0.6875 zone, marked by the low of January 21st, 2016.
On the other hand, if AUD/USD suddenly breaks that downside resistance line and remains trading above it, this could increase the pair’s chances to continue moving in the upwards direction. But, for a better confirmation, we would like to see a clear break above the 0.6962 barrier, marked by the lows of May 6th and 9th. Such a move might open the door to a larger move higher, where the next possible resistance area could be seen around the 0.6985 obstacle, a break of which might send the pair further in the upwards direction. This is when we will target the area around the 0.7025 level, marked near the high of May 8th.
As for the rest of today’s events
During the early hours of the Asian morning, Australia released its employment figures for the month of April. The expectation was that the number for the amount of unemployed people could be at 5.0%, but it came out with a slight disappointment, at 5.2%. The AUD did react to the news with a push lower, but then quickly after that it recovered some of those losses.
Also, the economic calendar shows that we get Eurozone’s trade balance for March, while from the US, we have building permits and housing starts for April. The Euro area trade surplus is expected to have increased to EUR +19.9bn from EUR +17.9bn, while both the US building permits and housing starts are expected to have increased after sliding in March.
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