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Brexit ruling, services sector and rates freeze offer triple tonic for sterling

Published 03/11/2016

The ruling saw sterling shoot past 1.24 US dollars, up nearly 1 per cent on the day
The ruling saw sterling shoot past 1.24 US dollars, up nearly 1 per cent on the day

Sterling leapt to a three-and-a-half week high against the US dollar after the High Court ruled that Brexit must face a parliamentary vote before Article 50 is triggered.

The pound surged to 1.249 versus the dollar, before paring gains to trade up 1% at 1.243.

Three senior judges ruled that Prime Minister Theresa May does not have the power to use the royal prerogative to push the button on Article 50 of the Lisbon Treaty without the prior authority of Parliament.

Sterling also climbed 1% against the euro to 1.120, despite the Government's immediate announcement that it would appeal against the decision at the Supreme Court.

Kathleen Brooks, head of research at City Index, said the ruling had pushed the pound to its highest level since the flash crash last month.

"This decision has increased the uncertainty around the UK's decision to leave the EU.

"While normally uncertainty is bad for the markets, this time it is good for the pound."

T he landmark ruling was part of a triple tonic for sterling, which was buoyed by better-than-expected data from the services sector and the Bank of England's decision to keep interest rates on hold.

The Bank's Monetary Policy Committee voted unanimously in favour of keeping rates at 0.25% , but warned that tough times were still ahead with lagging growth and an expected jump in inflation to 2.7% next year.

The update from the Bank came after it was revealed that output in Britain's powerhouse services sector rose last month despite costs climbing at their fastest pace for more than five years.

The closely watched Markit/CIPS services purchasing managers' index (PMI) hit 54.5 in October, up from 52.6 in September and above economists' expectations of 52.5.

Press Association

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