FX.co ★ GBP/USD. "The fish issue" and hawkish theses of Broadbent

The pound paired with the dollar was able to partially recover its positions today, bouncing off the base of the 32nd figure. However, the British currency did not run far: the upward momentum faded away around the 1.3290 mark. GBP/USD bulls could not even approach the borders of the 33rd figure, not to mention testing the resistance level of 1.3300 (Tenkan-sen line on D1 timeframe). During the take-off, bears became more active and put tangible pressure on the pair. And although the pound remained within the 32nd figure, it once again demonstrated its vulnerability and dependence on the greenback. The pound was not helped either by the positive news in the area of Brexit, or by the comments of the representative of the Bank of England. All this suggests that the British currency will continue to follow the dollar, which in turn is kept afloat due to the strengthening of hawkish expectations.

The surge in today's optimism was driven by Brexit. And although the so-called fish issue, which led to the political conflict between Great Britain and France, has not yet been resolved, today the first positive signals have appeared - albeit a very indirect one.

Let me remind you that this Friday - December 10 - the deadline for the next ultimatum that the French put before Britain in the context of the dispute over fishing in the English Channel expires. As you know, before Brexit, fishermen from all over the European Union could catch fish there, but now the British insist on their unconditional priority. In accordance with the norms of the Brexit agreement, the UK is obliged to issue appropriate licenses to European fishermen until 2026. But for well-known reasons (both commercial and political), London is in no hurry to "distribute" permits. This year, Britain has issued a little more than 950 licenses, but the French side insists on issuing additional certificates (from 150 to 200). London has been refusing neighbors for a long time. Paris in response threatened sanctions if fishermen do not receive additional licenses by November 2. Britain then did not escalate the situation: after negotiations between Johnson and Macron (!), the authorities of the island of Great Britain issued 49 more permits.

Obviously, France was not satisfied with this handout. Emmanuel Macron wants to resolve the issue radically, despite the failed outcome of weeks of negotiations. Paris threatens London with a ban on unloading seafood, increased control over goods coming from the island and even a power outage to the Channel Islands. The head of the French government also calls for a "re-inspection" of all (without exception) agreements. If we add here the trade and political conflict related to the non-compliance with the Northern Ireland Protocol and the migration crisis again between France and the UK, the overall picture turns out to be quite gloomy.

Plus, it should also be noted that the ratings of the Conservative Party in the UK and Johnson himself have been actively declining recently. Therefore, any significant concessions to France by the current Cabinet of Ministers are unlikely, given the possible electoral risks. Macron is also under some pressure: in April 2022, presidential elections will be held in the country, in which he will take part. Naturally, any concessions to the British will be interpreted against him.

Today it became known that the UK decided to issue another batch of permits to French fishermen. Traders regarded this fact as a positive signal, which may indicate progress in the notorious fish issue. In response to this news, the pound, paired with the dollar, jumped by 70 points, but still could not test the 33rd figure. Later, the market came to a reasonable conclusion that, in general, the problem has not gone away. Neither Macron nor Johnson are ready to compromise.

Deputy Governor of the Bank of England Ben Broadbent did not help the pound, who just announced that inflation will be higher than the target level in the next two or three years, if the central bank does not raise the interest rate. At the same time, he admitted that in March-April inflation will exceed the 5% mark. In other words, Broadbent was noticeably worried about the growing price pressure, and therefore suggested "discussing the issue of tightening monetary policy parameters at each subsequent meeting." At the same time, he rather vaguely commented on the risks associated with the spread of the Omicron strain. According to him, there are more questions than answers, so he is in no hurry with any conclusions. "We are not yet able to figure out whether a new modification of the coronavirus will change the established pattern of spending in the UK and around the world," Broadbent said.

Let me remind you that the last BoE meeting this year will take place in just ten days - on December 16. On the eve of this event, the deputy head of the central bank voiced rather hawkish messages that say that the British central bank's position will tighten in December (up to a rate hike of 15-20 basis points). But the pound ignored the speech, succumbing to pressure from the GBP/USD bears. By and large, the pound continues to move in the wake of the US dollar, under additional pressure from Brexit.

Taking into account the current fundamental background, we can consider short positions during corrective upward pullbacks. If, with the next correctional surge, the price growth will fade in the area of 1.3280-1.3290, you can enter short positions with the main target of 1.3200 (the lower line of the Bollinger Bands on the daily chart). The gloomy political background will not allow the GBP/USD bulls to reverse the trend, especially against the background of the rather strong positions of the greenback.