Pound rises as government loses Article 50 case
The pound surged against the dollar as the High Court ruled that the government does not have the power to trigger Article 50 and begin the process of Britain leaving the EU without parliamentary consent.
On Thursday the High Court ruled in a land mark case that MPs must hold a vote before the clause in the Lisbon treaty is activated for a two-year clock on Brexit negotiations with the EU.
Prime Minister Theresa May has previously said she will trigger Article 50 by the end of March 2017.
The ruling said: “The court does not accept the argument put forward by the government. There is nothing of the 1972 Act to support it.
"In the judgement of the court the argument is contrary both to the language used by Parliament in the 1972 Act and to the fundamental constitutional principles of the sovereignty of Parliament and the absence of any entitlement on the part of the Crown to change domestic law by the exercise of its prerogative power. The court accepts the principle argument of the claimants.
“For the reasons set out in the judgement, we decide that the government does not have the power under the crown’s prerogative to give the notice pursuant to Article 50 for the UK to withdraw from the European Union”.
The government said it was "disappointed" by the ruling and will appeal the decision to the Supreme Court for a hearing expected on 7 December.
The legal challenge was brought by investment fund manager Gina Miller, hairdresser Deir Dos Santos and others who questioned the Prime Minister’s executive powers over Article 50.
Neil Wilson, market analyst at ETX Capital, said the High Court ruling has made triggering Brexit a lot trickier and has given sterling a massive shot in the arm.
“The news sent the pound roaring through $1.24 before gains were pared as markets digest the news – the fact is no one really knows what the implications of this decision are yet. An appeal is coming in early December, so this is not final. Cable was last at $1.2432, its highest level in almost a month.
"Even if Article 50 is triggered as planned, this judgment could underpin sterling for some time and assuage fears about a ‘hard Brexit’ if the pro-EU camps in Parliament start to dictate terms to the government in return for voting with the people. We could see this create a floor under the pound around $1.25. Politics and uncertainty continue to drive the currency markets.”
However Jane Foley, senior FX strategist at Rabobank, said in recent weeks the pound has made clear that politics rather than economic news is its primary diver, but optimism over the ruling could be misplaced.
“Today’s ruling from the High Court that the UK government cannot trigger Article 50 without consulting parliament injected some optimism into sterling that a hard Brexit could be avoided.This may be misplaced.
"It is possible that some Remain MPs could respect the referendum result and support PM May’s intention to trigger Article 50 by the end of March. If this is the case, today’s ruling (while still important for the law) will have little meaning for markets. We continue to view GBP as a vulnerable currency. However, if Trump takes the presidency, GBP/USD’s recovery would likely extend towards 1.30.”
Meanwhile, Tim Farron, leader of the Liberal Democrats, welcomed the ruling.
“So far May’s team have been all over the place when it comes to prioritising what is best for Britain, and it’s time they pull their socks up and start taking this seriously," he said.
“Ultimately, the British people voted for a departure but not for a destination, which is why what really matters is allowing them to vote again on the final deal, giving them the chance to say no to an irresponsible hard Brexit that risks our economy and our job.”
Whereas former Ukip leader, Nigel Farage, said on Twitter he feared that those who voted to leave were going to be betrayed.
“I now fear every attempt will be made to block or delay triggering Article 50. They have no idea level of public anger they will provoke.”
The other legal challenges to Brexit were rejected by the Northern Ireland High Court in October, by ruling that the 1998 Good Friday Agreement did not prevent the government from triggering Article 50. This was followed by a slump in the pound.