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16.12.2019 01:34 AM
GBP/USD. Great Britain is outside the European Union. Problems begin even before the official Brexit.

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Fanfares died out, everyone was drunk from champagne, and the whole Kingdom celebrated the victory of Boris Johnson in the elections, and now the country really has the right to prepare for the final "divorce" from the European Union. Most likely, Boris Johnson will succeed in unhindered dragging his version of the "deal" with the European Union on Brexit through the new Parliament, which means that London and Brussels can announce the beginning of the "transition period" on January 31 (or even earlier). We said earlier that despite the strong appreciation of the pound against the optimism of traders regarding Brexit and the formation of a "majority government" by conservatives, the UK and the pound are now facing harsh everyday life. Moreover, pound may continue to strengthen in pair with the dollar, however, traders will begin to pay attention to macroeconomic statistics from Foggy Albion and from overseas sooner or later, and it does not need to be analyzed for a long time in order to draw appropriate conclusions. It is unequivocal, in favor of the American currency. Moreover, market participants can "remember" all those failed statistics from Britain in those two months when no one paid attention to it. If we add to this the still potentially long and complicated negotiations with the European Union on new trade relations between the bloc and the Kingdom, it becomes clear that the economic situation in the UK may continue to deteriorate, which will definitely negatively affect economic performance.And in the last three months, the main indicator of the state of the economy of any country – GDP - either showed negative growth rates, that is, decreased, or showed zero growth.

Nevertheless, this is not all the potential problems that may be encountered in the UK. The fact is that no less high-profile than Boris Johnson, Nicola Sturgeon won in her Scottish Parliament. From which her party scored 48 out of 59 possible seats. Sturgeon had also previously stated that Scotland is against leaving the European Union. Now, after the deafening victory of the Scottish nationalists, talk of holding a second referendum resumed. The leader of the Scottish National Party said that "the future of Scotland should be in the hands of the Scots." According to Sturgeon, British Prime Minister Boris Johnson has a mandate for Brexit in England, but does not have a mandate to withdraw Scotland from the European Union. Next week, the Sturgeon party will submit an official application for a referendum on independence. "It's not about to ask permission from the prime minister of Great Britain or any other Westminster politician. This is a confirmation of the democratic right of the people of Scotland to determine their future." Sturgeon emphasized. "Scotland cannot be a prisoner of Britain, it needs to be allowed to hold a referendum on independence, since it was on the verge of leaving the European Union against its will." summed up by the first minister of Scotland.

Thus, we believe that the UK can now face the new Brexit, even before the implementation of its own. Although it is difficult to say whether Nicola Sturgeon is able to hold such a referendum without the approval of London. And there is no doubt that London will not give approval. Thus,we can witness a new epic called "Scexit" (Scotland EXIT) very soon.

Paolo Greco,
Analytical expert of InstaForex
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