Sterling falls after UK Supreme Court rules on Brexit
Patrick Graham, Reuters
Posted at Jan 24 2017 10:36 PM
http://news.abs-cbn.com/business/01/24/17/sterling-falls-after-uk-supreme-court-rules-on-brexit
LONDON – Sterling fell and London’s FTSE 100 index rose on Tuesday in a volatile response to a UK Supreme Court ruling that the government must go through parliament, but not its regional assemblies, to trigger talks on leaving the European Union.
The pound hit 5-week highs after the first sections of the ruling were read, but was then hit by a wave of profit-taking by investors, fuelled in part by worries over how Irish and Scottish politicians and public will now proceed.
Scottish First Minister Nicola Sturgeon said she would bring a motion of consent to Edinburgh’s devolved assembly despite the ruling that the government did not need to ask for its approval, or that of the Northern Irish equivalent.
That hinted at more constitutional conflict in the pipeline and helped prod the pound back below $1.2450, a full cent off highs hit earlier.
Sterling drew support last year from the original ruling in London’s High Court which was perceived to support the pro-EU forces in parliament who are demanding a “softer” Brexit that prioritizes maintaining membership of the bloc’s lucrative single market.
But many market participants said the decision on Tuesday had already been factored into sterling and that it cleared the way for Prime Minister Theresa May to proceed with a “hard” Brexit by seeking approval only from Westminster and not the pro-EU regions.
“The question of the devolved assemblies was where the market focus was as this could potentially delay triggering Article 50 (which would launch talks on an exit),” said Mike Amey, sterling portfolio manager with giant bond investor Pimco.
“Our view is that the pound could still see some further weakness, probably more against the dollar than the euro.”
Sterling fell 0.8 percent to $1.2436 by 1139 GMT. It was also down 0.4 percent at 86.25 pence per euro.
“The ‘good’ news about greater Parliamentary scrutiny of the Brexit process had already been priced in,” said City Index analyst Kathleen Brooks.
“Thus, profit taking was to be expected at this stage.”
Falls for the pound have tended to support the internationally-focused companies on London’s FTSE 100 that become more competitive and profitable as the currency weakens. That index rose 0.2 percent on the day to 7163.51.
“The court ruling is a slap on the face of the British government,” said Jawaid Afsar, senior trader at Securequity.
“However, parliament is likely to give its approval and the Brexit timeline could remain on track. As far as investors are concerned, one more uncertainty is now out of the way and they can focus on other things.”
