UK Supremes Rule Prorogue Illegal

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Market Drivers September 23, 2019
Pound spikes on Supreme Ruling but gives up gains
IFO inline
Nikkei 0.09% Dax 0.04%
UST 10Y 1.71
Oil $58/bbl
Gold $1521/oz
BTCUSD $9723

Europe and Asia:
EUR EZ IFO 94.6 vs. 94.5

North America:
US Consumer Confidence 10:00

The UK Supreme court in a unanimous decision voided PM Johnson’s right to prorogue Parliament stating in no uncertain terms that the move was unconstitutional.

he Supreme Court’s president, Lady Hale, said: “The effect on the fundamentals of our democracy was extreme,” adding, “The decision to advise Her Majesty to prorogue Parliament was unlawful because it had the effect of frustrating or preventing the ability of Parliament to carry out its constitutional functions without reasonable justification.”

Cable rallied in the aftermath of the decision hitting highs of 1.2488 but quickly gave up some of the gains to settle at 1.2450. In some way, the decision may have been anticipated by the market with pound generally holding bid ahead of the ruling so it became a classic sell the news event. Furthermore, despite the restoration of Parliament, the Brexit negotiations show little progress so far which is likely to cap the upside for sterling for now.

Still, today’s unambiguous ruling was yet another stunning defeat for PM Johnson and makes the prospect of no-deal Brexit less of a possibility so ultimately the news is positive for the pound and after the initial dust settles the pair may make another run to 1,2500 level as the day progresses.

Elsewhere the IFO reading came in essentially inline at 94.5 and after yesterday’s horrid EZ PMI data was seen as a mild relief. The EURUSD was steady at 1.0990 in Asian and European trade but if risk flows improve in North America the pair could make another run at the 1.1000 level as 1.0950 appears to have held as support.

Boris Schlossberg
Managing Director

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