Supreme Court ruling strengthens the pound but uncertainty remains for markets
Traders were hopeful that the decision reduces the chances of a no-deal Brexit but caution continues.
The pound rose against the dollar and the euro as traders digested the verdict from the Supreme Court that the Prime Minister’s decision to prorogue parliament was unlawful.
In the immediate moments following the judgment, the pound rose about 0.5% against the euro – going from lows of one pound being worth 1.12970 euros at 9am, to 1.13532 euros at 10.40am.
The pound moved against the dollar by similar amounts – rising from 1.2416 dollars before the ruling and as high as 1.2485 dollars.
Both jumps have cooled as the markets wait to see what happens next, but analysts and commentators saw the ruling as a positive for avoiding future unpredictable decision-making by Downing Street.
David Cheetham, chief market analyst at XTB, said: “Had the court ruled that the matter was not justiciable, then the PM may well have felt further emboldened to pursue unorthodox tactics to keep no-deal on the table and engage the UK in a game of high-risk brinkmanship.”
He (Boris Johnson) is suddenly in a considerably weaker position Fiona Cincotta
Caution remains, with traders aware that uncertainty remains high and Brexit remains on the horizon.
Fiona Cincotta, senior market analyst at City Index, explained: “The reason the pound hasn’t rallied higher is quite simply because the level of political uncertainty in the UK remains extremely elevated.
“This ruling also undermines Boris Johnson’s strategy with EU negotiators.
“He is suddenly in a considerably weaker position.”
The pound strengthening also had a slight knock-on effect on the FTSE 100, which was down 8.2 points by lunchtime, which tends to happen when sterling rises, due to several major companies on the leading index trading in dollars.
Simon Harvey, currency analyst at Monex Europe, added: “The probability of the government forcing a no-deal exit has been trimmed by the decision, but the extensive repercussions a no-deal exit would have to the UK economy continues to hang around the pound’s neck, capping any optimism.”