Boris Johnson’s Nightmare Puts the Pound on Road to Nowhere
(Bloomberg Opinion) -- “Unlawful, void, and of no effect.” The U.K. Supreme Court’s unanimous ruling against Prime Minister Boris Johnson’s decision to suspend parliament for five weeks could not have been clearer. For the pound, however, the outlook remains distinctly hazy.
With all 11 of the judges in agreement in an unprecedented defeat for the government, Johnson’s position looks shaky at best, and perhaps untenable. With the U.K. set to leave the European Union at the end of next month, the implications of the court judgment for Brexit mean yet another redrawing of the decision flow charts that have proven completely unreliable guides ever since Britain voted in favor of quitting the bloc.
Parliament has expressed its objection to leaving the EU without a deal, but hasn’t been able to agree what terms it would find acceptable. While today’s ruling makes it impossible for Johnson to carry out his implied threat to exit even without an agreement by suspending Parliament through Oct. 31, that remains the default outcome if nothing else changes.
As the prospect of no deal trashing the U.K. economy has grown in recent months, every pound rally has petered out as quickly as it began.
Small wonder, then, that traders who initially pushed sterling higher in the wake of the court’s announcement quickly lost enthusiasm for chasing the currency higher. While the Supreme Court’s decision is historic and potentially devastating for Johnson, it still leaves investors with absolutely no idea about what happens next — it’s pretty much “as you were” for the markets.
“The House of Commons must convene without delay,” Speaker of the House John Bercow said in a statement. That raises the prospect of members of Parliament rushing back to Westminster on Wednesday.But what happens next remains unclear. Will Johnson resign? Can Parliament force him to seek another delay from the EU? Will there be an election? Might the PM even defy the courts and reopen the constitutional crisis the courts have sought to avert?
Currency traders are sitting on the fence. For once, that’s probably the right place to be.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net
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Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."
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