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Sterling steady as traders await for Supreme Court decision on proroguing parliament

Credit: REUTERS/DADO RUVIC

Sterling held steady on Monday as investors awaited the British Supreme Court decision on whether Prime Minister Boris Johnson misled Queen Elizabeth over proroguing parliament, as well as whether Johnson will be able to find some compromise over Brexit at the United Nations General Assembly in New York.

By Olga Cotaga

LONDON, Sept 23 (Reuters) - Sterling held steady on Monday as investors awaited the British Supreme Court decision on whether Prime Minister Boris Johnson misled Queen Elizabeth over proroguing parliament, as well as whether Johnson will be able to find some compromise over Brexit at the United Nations General Assembly in New York.

Expectations that some progress in Brexit negotiations will be made at the United Nations were low, however, leaving little room for dissapointment for pound traders in case it does turn out that Johnson fails to gain some ground from European leaders, analysts said.

"We are sceptical of much in the way of progress being made and on top of that there is also the risk of PM Johnson having to cut his trip short to return to London if the Supreme Court decision goes against the government," said MUFG analysts in a note to clients.

Johnson suspended - or prorogued - the British parliament for five weeks until Oct. 14, which Scotland’s highest court of appeal ruled unlawful. But Johnson appealed the Scottish decision to the Supreme Court, which is expected to announce its decision early this week, analysts said.

If the Supreme Court were to rule against the government, it would increase political uncertainty in the country and "weigh on sterling a little," said Jeremy Stretch, head of G10 forex strategy at CIBC.

The collapse of British travel firm Thomas Cook TCG.L will also likely put some pressure on the British currency as it highlighted the weakness of the British retail sector, Stretch said, adding that he sees "a drift lower for cable (pound/dollar) for now."

Sterling/dollar will likely trade around "$1.23 in the short term," Stretch said.

The pound was down 0.3% in mid-morning London trading at $1.2435 GBP=D3, having dropped earlier to a six-day low of $1.2424, mostly due to broad-based dollar strength.

The dollar index .DXY was up 0.2% at 98.74 after rising earlier to 1 1/2 week high of 98.832.

Against the euro, the pound was flat at 88.265 pence EURGBP=D3.

The British pound had pulled back from a two-month high and fell on Friday after Irish Foreign Minister said that London and the European Union were not yet close to a Brexit deal.

(By Olga Cotaga; Editing by Angus MacSwan)

((olga.cotaga@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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