The pound jumped yesterday on the surprise announcement that the UK’s Supreme Court ruled against Prime Minister Boris Johnson on his closure of Parliament, calling it “unlawful”. The initial reaction suggested the likelihood of a no deal in the immediate future was made less likely but the ongoing uncertainty and increased likelihood of an election. Investors saw no indication that Sterling gains would be sustained.
The pound gained as much as 0.6% against the dollar and 0.4% against the euro but some analysts have compared the pound’s volatility since 2016 to that of an emerging market currency. This perception does damage to an economy whose key strength lies in stability.
Parliament will re-open today at 11:30am with many members of the opposition calling on Johnson to resign for acting unlawfully but it is unclear what course of action will be taken. Many analysts have been quick to highlight the ground-breaking nature of the court ruling for which there is no precedence. Boris Johnson is still under the legal deadline of October 14th to return to parliament with a withdrawal agreement or be forced to request an extension from the EU.
GBPUSD opened at 1.2423 and rose across the morning, hitting a high of 1.2496 shortly after the judgement from the Supreme Court, the pair closed at 1.2486 in the afternoon
GBPEUR opened at 1.1305 and followed a similar pattern, reaching a high of 1.1353 and closing at 1.1337
The dollar fell yesterday as Democratic members of Congress called for an impeachment inquiry against President Donald Trump along with weak consumer confidence data fuelling concerns about US-China trade talks. Trump confirmed withholding foreign aid funds to Ukraine but claimed it was not because he wanted leverage to initiate an investigation that could harm the reputation of democratic presidential candidate Joe Biden.
Speaker of The House Nancy Pelosi will give a statement at 8:00pm BST in which she will announce that the lower house of Congress is initiating a formal inquiry into Trump’ impeachment. The dollar index fell 0.28%. Investors were seeking refuge in safe-haven currencies which boosted the Swiss franc (0.45%) and Japanese yen (0.48%). The dollar had started the session weaker on the back of a strengthened euro, supported by German data showing business morale rose in September.
EURUSD opened at 1.0989 and made strong gains across the day, rising sharply in both the morning and afternoon to close at 1.1015