Sterling rises as Supreme Court scuppers Boris Johnson’s Brexit plans
Sterling has risen around half a cent against the dollar after the Supreme Court ruled that Prime Minister Boris Johnson’s move to prorogue parliament was unlawful.
GBP rose to $1.2487 after Lady Hale announced the 11 justices’ unanimous decision that “parliament is not prorogued”.
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Speaker John Bercow said he plans to convene parliament “as a matter of urgency” as the likelihood of Johnson securing a 31 October Brexit slipped.
The pound rose half a cent between the start of Lady Hale’s speech and the end of it. But GBP’s spike at 1.2487 came short of the $1.25 mark before falling back to $1.2452 by 11am.
Analysts called the decision a huge blow for the Prime Minister, who has pledged to pull the UK out of the EU with or without a deal by 31 October.
“Johnson has been pushed in the corner now and the chances of Brexit taking place by the end of October are minimal and the only way forward is a general election,” said Think Markets analyst Naeem Aslam.
“Traders pushed sterling higher on the back of the court’s decision and we expect this trend to continue from here onwards.”
MPs now have more time to debate the PM’s Brexit strategy and manoeuvre to force Johnson to request an extension that could take Brexit into 2020.
Neil Wilson, chief market analyst for Markets.com, noted that the pound failed to break through $1.25, and questioned whether the decision brings the UK closer to a Brexit deal.
He added: “It does really deliver a massive blow to Boris Johnson. It’s perhaps not fatal, but it’s not going to make life any easier and we are now faced with significant uncertainty of a different hue.”
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“We are heading for a General Election for certain that will decide matters, we hope,” Wilson added.
“Quite what MPs think they can achieve in the next three weeks that they have not been able to do in the last 3+ years is beyond me. Like those old BT adverts used to tell us, it’s good to talk, and MPs love a good natter.”
Sterling had climbed to $1.2475, up 0.349 per cent against the dollar, by 1pm.
“With ministers heading back to Parliament imminently, still five weeks ahead of 31 October, there is time to prevent a damaging disorderly Brexit,” City Index’s senior market analyst, Fiona Cincotta, said.
However, she warned that the unpredictability of British politics has put a ceiling on how high sterling can rise.
“The reason the pound hasn’t rallied higher is quite simply because the level of political uncertainty in the UK remains extremely elevated,” she said.
“This ruling also undermines Boris Johnson’s strategy with EU negotiators. He is suddenly in a considerably weaker position. And let’s not forget the Bank of England indicated a rate cut could be on the horizon in the case of prolonged Brexit uncertainty.”
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Craig Erlam, senior market analyst at trader Oanda, called the Supreme Court ruling a “humiliation” for Johnson.
“Whether it has come as a surprise to the Prime Minister is difficult to say but I’m sure he will have been prepared for this possible eventuality,” he added.
“It’s extremely difficult to say whether the ruling will be a game changer or nothing more than a headline maker but it will certainly ramp up the Brexit theatrics, just over five weeks ahead of the end of October deadline.”