GBP has negatively reacted to the Supreme Court's Article 50 ruling - ING
|Viraj Patel, Foreign Exchange Strategist at ING, notes that the GBP has negatively reacted to the Supreme Court's Article 50 ruling - which judged that Parliament will have to vote on the triggering of Article 50 (as expected), but did not extend this privilege to devolved assemblies (ie, there was no further dilution of the UK government's prerogrative powers).
Key Quotes
“The market reaction corroborates our view that:
Political uncertainty has increased: amendments and blockages by opposition parties to any Brexit bill proposed by the government will only slowdown the process of the UK leaving the EU. This will prolong uncertainty; price action since the Brexit referendum confirms that uncertainty is unambiguously GBP negative. All eyes will now be on the wording of the government's Brexit bill due this week (more info expected when Brexit Secretary David Davis speaks at 1230 GMT).”
“Equally, the ruling also serves as a bit of a reality check that the UK will be exiting the single market and that the path towards a 'hard' Brexit remains firmly on the table. Unless opposition parties can have a greater say on the Brexit process (ie, steer the strategy once negotiations are underway or completed), markets will continue to price in the risk of a 'hard' Brexit. This again will keep the downside GBP bias in place.”
“Strategically, we remain bearish on GBP/USD and see risks of a move down towards 1.21 over the coming weeks - especially once markets reconnect with the idea of Trumpflation. Initial support comes in around the 1.2430/40 area, though we would expect this to give way, with fresh bearish GBP bets leading to further downside.”
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