UK Supreme Court Finalises Brexit: Impact on Sterling

Posted on Posted in All Recent, Markets, Trending Markets

Published: Wed 25th January 2017

Author: Victor Thiry

Read Time: 2 minutes

UK Supreme Court Finalises Brexit: Impact on Sterling

On the 23rd of June, Britain had voted to exit from the European Union (EU), and Sterling consequently faced its biggest drop since 2008. The worries are far from over, as on the 24th of January, the Supreme Court had ruled that the Parliament must trigger Article 50. However, this may contradict with some of the existing UK laws. In a nutshell, the UK is one step closer to Brexit. This recent "breaking" news made the Pound drop even further.  

 

What is Article 50?

As no country has left the EU, measures must be taken to clear out this road of uncertainty – there is no previous example to follow – everything that occurs will potentially set a precedent for the future.

Article 50 states that if a country wishes to withdraw its position from the EU, it has to notify its fellow members and follow
a five-point plan. The five-point plan explains that if a state wishes to leave the EU, it has to enter a negotiation with other members to finalise the terms of a country leaving. 

 

Why did the Pound Drop?

Everyone knew that Brexit was going to happen, and it is of course happening as we speak, with negotiation between the EU and Theresa May expected to commence by the end of March. So, the question is, why did the Supreme Court ruling result in the Pound dropping in value?

Quite simply, Brexit is taking baby steps, but is still going ahead. Since July 2016, the Pound has been in decline. This ruling was on the front page of many newspapers and was treated as an alarm to investors, that Brexit is in fact going to happen – hence the fall of the Pound on Tuesday.

London is also known as the financial capital of Europe. This coupled with Brexit occurring, and also other potential protectionist measures, the Pound will have no ‘backbone’ to repose on. 

The Supreme Court ruling shows that we are one step closer to Britain breaking up with the EU – with a potential finish line set for June 2019.

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