Has Sterling been priced in to the Supreme Court ruling?

The eagerly anticipated Supreme Court ruling, heard by a record 11 judges will be handed down on Tuesday 24th January at 9:30am. The panel are deliberating whether Theresa May must seek the permission of Parliament before she triggers Article 50 of the Lisbon Treaty and begin the formal exit process from the EU. This has the potential to be the first political upset this year in a continuation of events seen throughout 2016 and a major mover in the currency market early next week.

Whilst I believe the market has already priced in an uphold in the ruling, recent polls from Reuters have suggested the appeal decision may be far from the unanimous High Court outcome last year. If the ruling is overturned I believe GBP/EUR rates could plummet to mid-1.12 levels on the news, making a €200,000 transfer £4,500 more expensive. If you have a EUR requirement it may be advisable to get in contact with your experienced personal broker here at Foreign Currency Direct to talk through your options before the event.

Further Brexit limbo in the pipeline?

If the ruling is upheld, in my opinion there are two scenarios that could occur:
Firstly, the court allows Theresa May to draw up a short bill, or even a motion, focused solely on Article 50 making it much more difficult for Parliamentarians to amend, meaning the March deadline set out by the Prime Minister is entirely realistic.

Secondly, as suggested by Lady Hale – deputy president of the Supreme Court – it is possible the judges demand a “comprehensive replacement” of the 1972 European Communities Act. If this were to happen it could make the March deadline unfeasible, causing further Brexit uncertainty and supressing any sign of Sterling strength for the near future.

True cost of Brexit means Brexit

On Tuesday at 11:45am, Prime Minister Theresa May finally presented her long-awaited and highly anticipated plan for Brexit. The “No deal is better than a bad deal” approach taken by Theresa May was clear-cut and concise, seeing GBP rally hard against all its major counterparts on the day.

Trading between the highs and the lows on the day could have seen you save £4,800 on a $200,000 transfer and £3,600 on a €200,000 transfer.

However, if the UK fails to negotiate a free trade agreement with the EU in the specified 2-year window once Article 50 is triggered the UK will be forced to trade with the EU under World Trade Organisation rules. Meaning UK exporters would be hit by the EU’s Common Customs Tariff taxes, pushing up the “cost” of UK exports by an estimated additional £4.5bn per year. An amount that would more than likely have to be picked up by businesses themselves - reducing profits - to avoid becoming less competitive globally.

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