Despite the general strengthening of the dollar at the beginning of the trading week, the British currency is making spontaneous attempts of further recovery. The peculiar uniqueness of the pound/dollar pair lies in the fact that the issue of US monetary policy in the background, against the backdrop of the central, "mainline" theme of the Brexit. The long months-long negotiation process is coming to its culmination point, and in the coming days (or even hours) the parties will announce the results of political negotiation. And despite the fact that all previous negotiating rounds ended in failure, there is still hope for a deal: the pound's behavior eloquently testifies to this.
However, today the British pound should not be trusted: the pair fluctuates only on expectations, which with a high probability may not be justified. It is about the visit of Prime Minister Theresa May to Brussels. The head of the British government will try to personally agree on concluding a deal with EU representatives. Today, she must meet with European Commission President Jean-Claude Juncker and Michel Barnier, who is in charge of the negotiation process with London. Majority of the polled political analysts have high hopes for this visit. After all, the parties initially planned to discuss all the conditions and nuances of the "divorce" before the EU summit on October 19-20, and at the summit itself to review and begin preparations for the real Brexit procedure, which should be completed before the spring of 2019.
Now, to reach the final negotiations at the summit (in fact, this is the ratification of previously reached agreements), Theresa May now needs to show all her diplomatic and political abilities - after all, she must, in a few days, do what the negotiating delegations could not do for many months. On the eve of May, held a telephone conversation with Angela Merkel, discussing the upcoming meeting. The press service of the British Prime Minister commented on this conversation rather dryly and shortly, saying that the leaders of the countries had agreed "on the continuation of the constructive dialogue." The template phrase does not tell us anything, but the very fact of this call indicates that Theresa May prepares the ground for a political compromise.
At the moment, there are three main positions on which the parties can not find a common ground. First, these are the rights of EU citizens in Britain. In EU countries, there are now more than one million Britons who live and work in the member countries, and in turn in the UK - almost three million citizens of the European Union. According to the EU, London must adhere to all norms of European legislation for two years after the country leaves the bloc. In this case, Brussels agrees to retain full access to a single market.
Another cornerstone of the difficult negotiations is the financial side of the "divorce". As the British prime minister said earlier, London is ready to pay 20 billion pounds, but only on one condition - if its country retains full access to the single European market, without additional conditions. This position has no support among the British (according to polls, they are generally against the payment of "compensation"), the more so, in the opinion of the House of Lords, there are no legal grounds for any compensation, Britain can leave without paying off. But in the long term, the economic losses due to lack of access to a single market will be much more than the amounts specified. Therefore, May will have to agree on the amount of payments, despite the displeasure of ordinary Britons.
And the final issue of the negotiation process is the status of the border with Northern Ireland. The "hard" scenario of Brexit assumes the establishment of an international border, with all the ensuing consequences for residents (both economic and social). In Northern Ireland, almost unanimously opposed the withdrawal of Britain from the EU, and now the EU's external border can pass through. According to local entrepreneurs, the "hard" option of "divorce" with the European Union will be a disaster for them. For example, just a few months before the referendum, a large dairy company built a new milk production factory for 45 million euros, based on trade agreements with the EU. In the event of the loss of a single market, entrepreneurs will face WTO tariffs, which will actually ruin the business built. And this example is only the "tip of the iceberg" of the perceived problem.
Thus, the pound is now the hostage of the negotiation process. In the very near future, we will find out whether Theresa May could convince her political opponents in Brussels to accept their terms and/or whether she has decided on any compromises. Generally, the outcome of her meeting will decide on the fate of the pound/dollar pair in the medium term.
Technically, the pair also froze in anticipation. The main indicators are silent, and only the indicator Bollinger Bands says that the price is ready for an impulse jump. On the daily chart, the pair is in the Kumo cloud and near the midline of the Bollinger Bands indicator. For a pair of bulls, it is important that the price overcomes this line, and also anchored above the Tenkan-sen line of the Ichimoku Kinko Hyo indicator (1.3340). In this case, Ichimoku will form one of his strongest signals - " Parade Line". When this scenario is adopted, the next target of the pair's bulls will already be the mark 1.3605 - this is the top line of the Bollinger Bands indicator on D1.
However, before the announcement of the outcome of the talks between Theresa May and the key EU politicians, it is recommended to refrain from trading this pair.