UK: Supreme Court decision in focus this week - BBH

Research Team at BBH, suggests that the UK’s Supreme Court hears the government's appeal of the Constitutional Court ruling that protected Parliament's authority to trigger Article 50. 

Key Quotes

“A decision is not expected until the middle of next month.  Many expect it to uphold the Constitutional Court's decision.  This is important for the markets because Parliamentary involvement is associated with a soft Brexit rather than a hard one.  And a soft Brexit is seen as sterling positive. Moreover, it may delay the triggering of Article 50 by three or four months.  Still, through the cacophony, it appears that on balance, access to the single market is possible, at a price.”

“Last month, sterling was the only major currency to appreciate against the dollar (~2.15%). Sterling's gains came despite the fact that interest rate differentials moved dramatically against it.  The US premium on 2-year paper rose from 58 bp at the end of October to a little above 100 bp before the end of November.  It is the most in at least a quarter of a century.  UK November services and composite PMIs came in stronger than expected and both rose to 55.2.”

“Many argue that the resilience of the UK economy shows that those favoring Brexit were right and the economic risks were exaggerated by the Remainers.  However, the sterling's decline was a shot in the arm, a dramatic one-off devaluation.  Against the dollar, sterling has fallen by about 17%, and on a broad trade-weighted index, it is off by about 10%.  The currency depreciation, coupled with the low interest rate loans by the Bank of England’s rate cut and the resumption of its asset purchases, mean that the UK economy got a large dose of monetary stimulation.”