Yesterday's event in the House of Commons is very confusing, because it is clear to everyone that the adoption of a law that violates existing agreements and agreements undermines the position of the United Kingdom. However, this is exactly what happened yesterday and with a significant margin in favor of the supporters of this bill. To simply put it, the UK has shown everyone that it can unilaterally, at its own discretion, revise existing international agreements if it thinks that they no longer suit it. In other words, there is simply nothing to negotiate with London, since the United Kingdom can take and rewrite everything literally the next day after the signing of the next treaty. To be honest, the UK does it regularly. This was especially practiced in those days when London ruled a gigantic colonial empire. But in this case, everything is slightly exciting, since the bill itself provides for London's right to unilaterally amend the clauses of existing trade and migration agreements, in the event that the European Union does not make concessions, that is, it is legalized blackmail and at the international level. This threatens London with serious consequences.
After all, now is not the second half of the 19th century, when Great Britain literally ruled half of the world. It will be disastrous this time, exclusively for the United Kingdom itself. In economic terms, it loses much more than Europe. Rather, we can say that it is even beneficial for Brussels. But the motivation of Boris Johnson and his supporters is also understandable. Despite that, the difficult situation from abroad between the Republic of Ireland and Northern Ireland gives rise to such a structure that the UK continues to remain in the free trade zone of the European Union, but without the right to somehow influence the development of rules, regulations, the taxation system and customs politics. In short, Great Britain turns into a colonial appendage of continental Europe. Here, you can really take any measures to preserve your own independence but the irony is that London has driven itself into a situation from which there is simply no good way out – one is worse than the other. In general, as soon as the voting results became known, the pound, which had hoped for at least some sanity of the people's representatives and, accordingly, was growing, immediately declined. It is also significant that the single European currency practically did not react to this. It continued to slowly rise and this clearly demonstrates that Europe is the beneficiary in this whole story.
The gradual and even dull growth of the single European currency began with the publication of data on industrial production in Europe, the decline rate of which slowed down from -12.0% to -7.7%. This is slightly worse than expected, as the decline was expected to slow down to -7.6%. And the recession itself has been going on for almost two years. Nevertheless, this is clearly an improvement in the situation. The rate of decline has slowed down significantly and industrial production actually increased by 4.1% in monthly terms.
Industrial production (Europe):
It is clear that today's key event is the second vote in the House of Commons on the protection law of the UK internal market. So far, the parliamentarians have only approved the general concept of the law. Now, it is the turn to consider its individual provisions. In view of this, the pound froze in anticipation, and we do not see the growth that preceded yesterday's vote. Investors no longer believe in a positive outcome but no one is going to risk it yet. It is likely that the House of Commons will introduce so many amendments and changes that the content of the bill will change significantly. However, no one intends to proceed from this calculation. This expectation allowed the pound to ignore data on the labor market, which only raised questions again. The unemployment rate rose from 3.9% to 4.1%. In the United States, the unemployment rate is already declining, while it has just started to rise in the UK. Second, the unemployment rate in the United States is extremely low for the current situation. At the same time, the number of applications for unemployment benefits rose by 73.7 thousand, with a forecast of 51.0 thousand. In turn, employment declined by only 12.0 thousand despite the fact that it was expected to reduce by as much as 120.0 thousand. In general the data are purely negative, which was currently ignored since everyone is waiting for the decision of the House of Commons.
Change in the number of applications for unemployment benefits (UK):
The Brexit story will most likely overshadow everything today, and investors will not pay attention to the data on industrial production in the United States. The rate of decline of which may slow down from -8.2% to -6.1%. But this will not change anything, as the expectations for the data are optimistic, that is, they should help strengthen the dollar. But it is very likely that the dollar will grow without it. The House of Commons will take care of this.
Industrial production (UK):
The EUR/USD pair, moving along an upward course, approached the resistance level of 1.1900 once again, where a slowdown naturally arose. It can be assumed that in the case of a repetition of the pattern associated with the 1.1900 area, there will be a reverse movement in the direction of the values 1.1860 - 1.1810. For an alternative scenario, we consider breaking down the September 11 high - 1.1917, which may lead to a violation of the pattern and, as a result, a rise towards 1.1950-1.2000.
The GBP/USD pair is at the correction stage from the support level of 1.2770, where the quote came due to the inertial move the other day. We can assume that the downward interest is still a relevant direction, but due to the local oversold stage, stagnation may occur along the level 1.2885.