Image source: Chris Dorney © 123RF.com
On Thursday a pivotal election will take place in Britain, which will essentially seal the future of Brexit in one way or another.
Boris Johnson and his Conservative party are facing the opposition of Jeremy Corbyn and the labour party in a General Election that will be won by a pure majority victory.
The Prime Minister called for the election after his proposition to go ahead with a no-deal Brexit by the 31st of October was blocked in a Parliamentary vote, which prohibited Johnson from taking the country out from the EU on the original date.
At the time, Johnson was forced to seek an extension of the deadline until the 31st of January 2020, however, the PM decided to circumvent the legal blockade for his no-deal Brexit by calling for a General Election.
If Johnson wins on Thursday, that means he will come on top and the House of Commons will no longer be able to prevent him from imposing his will.
Such general elections, however, are a double-edged dagger, as his predecessor – Theresa May – had attempted a similar course of action before and failed to secure a majority win, which ultimately led to her demise as a PM.
The latest polls from the weekend suggest that at the current moment Johnson is enjoying a substantial lead in front, which means that the Tories will most likely win on Thursday.
Meanwhile, the pound has been strengthening over the past few weeks, as the ambiguity around Brexit is starting to clear. A decisive win for the PM would mean that the overall uncertainty around the divorce process would be lessened.
Regardless, the key questions of Britain's post-departure future remain unanswered.
If Johnson wins, he would most likely push for a Brexit by the 31st of January with or without a deal, which means that the future of the British economy would still be put in peril from long-term uncertainty.
It is more than likely that the pound’s short-term rally, which was supported by the falling uncertainty around the elections’ outcome, would be terminated once the fears over Britain’s long-term economic stability become prevalent once more.
The GBPUSD is currently consolidating just below the significant resistance level at 1.31700, which has been prevailing since early April 2019.
The pair strengthened following the formation of the bullish flag pattern; however, it is unclear whether it would manage to break out above the resistance successfully.
What is almost certain is that the volatility levels would surge by the end of this week, not only because of the General Election on Thursday but also because of FOMC’s interest rate decision, which is scheduled for Wednesday.
GBPUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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