GBP remains sell on rallies even if courts rule a vote is needed – Nomura

Nomura Global FX Strategy team says the British Pound could rally the government accepts the verdict from the court that to trigger Article 50 requires a vote. However, in the long-run the sell on rallies view remains intact.

Nomura’s rationale

Imagine the hypothetical scenario where the government accepts the verdict from the court that to trigger Article 50 requires a vote.

With the UK not in a recession it is hard to see what pressure MPs are under to ignore the result of the referendum. So while we think GBP would rally on such a headline, we would have to remember Article 50 could still pass a commons vote.

The House of Lords may try to slow things down but eventually the use of the Parliament Act would get it through. This formality may add another layer of “checks and balances” but, with the government refusing to show its full hand before reaching the negotiation table, the UK’s demands are likely to remain vague and optimistic.” (i.e. “best possible access” and so on). So GBP yet again would be a sell on rallies.