LONDON (Reuters) – Trading in the pound was quiet on Tuesday before the Supreme Court rules on whether Prime Minister Boris Johnson misled Queen Elizabeth when he asked her to suspend parliament for five weeks until Oct. 14.
The top court’s decision will be announced at 10:30 a.m. (0930 GMT), but some analysts say it is unlikely to move sterling by much, since the implications are more of a long-term issue.
“I don’t want to over-hype today’s decision,” said Jordan Rochester, forex strategist at Nomura. But the decision “will have long-reaching implications that could rewrite our unwritten constitution,” he said.
Sterling should fall if the court rules the suspension was not unlawful and says the judiciary should not get involved at all. If it rules the suspension was unlawful, the pound is likely to rise, said Rochester, because the legislature could be recalled and given more chance to block Johnson’s Brexit plans.
“What’s negative for Boris (Johnson) is positive for pound these days.”
But none of those outcomes will move sterling more than 0.5% either side, Rochester said.
The pound was down 0.1% at $1.2418 in early London trading. It also fell to 88.51 pence against the euro.
Nervous investors instead turned to the derivatives market, buying protection against unexpected moves in sterling, sending one-month implied volatility gauges — which encompass the deadline for Johnson to find a Brexit deal — to a three-week high.
Johnson advised Queen Elizabeth to prorogue, or suspend, parliament on Aug. 28. His opponents said he trying to stymie challenges to his promise to take Britain out of the European Union on Oct. 31 with or without a transition agreement.
Johnson says the aim of the suspension — from Sept. 10 until Oct. 14 — was to allow his Conservative government to bring in a new legislative agenda and that few working days would be lost.
(Graphic: Sterling one month vol link: here).
