Brexit Deal to Be Decided in House of Commons| Influencer Forex Analysis•Jasper Lo

Boris Johnson finished the over-one-year trade talks with the EU as a Brexit trade agreement was announced on Dec. 24. The Agreement seems to be a Christmas gift jointly given by Britain and the EU. However, the British pound still finds its prices unchanged, which is also the concern of many investors. By my reckoning, the following three factors are the reasons why the pound failed to rise sharply.

First of all, the financial market has been betting on a possible Brexit deal, ratcheting up the pound in the waiting period. The buoyant pound has reflected the result already. Thus GBP/USD kept retreating after slightly moving up above 1.3600.

Second, the forex market is tame during the Christmas and New Year holidays because forex traders are unwilling to carry out large transactions at this point.

Third, the Agreement, although has been reached by both sides, can be launched only after receiving both parliamentary approvals. Theresa May, Former British Prime Minister, also reached a Brexit deal when in office. But MPs in the House of Commons rejected her deal several times because of the growing dissatisfaction with her concessions. Mrs. May finally announced her resignation in May 2019. By this account, traders will not look for big deals until the House of Commons votes on the Agreement on Wednesday (Dec. 30).

Keir Starmer, Leader of the opposition Labour Party, said he would whip Labour MPs to support the Agreement because it's better than no deal, albeit a “thin” one. Unfortunately, some Labor MPs questioned his position and were in favor of abstaining on the vote. What's worse, some others will have an opportunity to air their opposition, considering Johnson made concessions in the negotiations after all. Therefore, parliamentary approvals from both sides is an essential prerequisite for the deal to take effect.

Even if the deal gets an easy pass in both the UK Parliament and the European Parliament, chances are forex traders could take advantage of the anti-climax. In other words, they could unwind their positions and exit the market on the positive dynamic, which will weigh on the pound prices. Besides, the Bank of England could increase the money supply and implement negative rates when necessary, since the countrys economy is partially collapsed amid the raging pandemic. Technically speaking, GBP/USD will find significant resistance at 1.3710 and key support at 1.3134. However, if the House of Commons rejects the deal on Wednesday, the pound will plunge, certainly and inevitably.