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May reaches governing deal with DUP

Summary:

  • May’s party and the DUP strike the governing deal
  • PM’s May has given the DUP GBP 1bln additional funding
  • GBPUSD rises following the announcement 

The long-awaited decision has been ultimately announced, there is little surprise though as it was broadly expected following the UK’s snap elections fallout. However, the British pound is rebounding as the agreement between the May’s party and the Northern Irish DUP ends a period of uncertainty with regard to forming the new government. 

The “confidence and supply” deal aims to allow May’s party to govern despite losing its parliamentary majority in the general election earlier this month (a hung parliament). According to the DUP, the UK is going to work toward devolution of corporation tax. Moreover, Theresa May has reportedly given the DUP GBP 1bln additional funding for North Ireland in exchange for support. Money will be paid over the next 2 years.

Besides, parties agree to keep triple lock, keep winter fuel payments for pensioners without means-testing as well as to retain NATO commitment to spend 2% of GDP on defense. In case of one of the most important issue there is an accord to support government on Brexit legislation, all motions of confidence, budget and legislative program. 

Just in case, let us recall who actually the DUP is. It’s the largest political party in Northern Ireland but one of the smaller parties in the House of Commons. Their leader Arlene Foster is keen to avoid a hard border with Ireland and had previously spoken against a hard Brexit. The party has some controversial stances with members having called for a return of the death penalty and being outspoken critics of the LGBT community.

A response seen at the GBPUSD chart is quite subdued as much of this story was already priced in yet before the official deal. 

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 The GBPUSD is bouncing off the support placed at around 1.27 following the agreement between the May’s party and the Northern Irish DUP. It could eye the nearest resistance located in the vicinity of 1.2750. Source: xStation5

 

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