Sterling weakens as political limbo deepens on Brexit

GBP fell half a percent against US dollar to $1.2434 and weakened 0.2 percent against euro to 88.41 pence.

    More uncertainty is expected as parliament returns on Wednesday [File: Phil Noble/Reuters]
    More uncertainty is expected as parliament returns on Wednesday [File: Phil Noble/Reuters]

    The pound fell half a percent on Wednesday as investors braced for more British political uncertainty in the coming months after the United Kingdom's Supreme Court ruled that Prime Minister Boris Johnson had unlawfully suspended parliament.

    While the ruling reduced the likelihood of the UK leaving the European Union without a deal by October 31, it also opened the doors to various options including a new election, a delay to Brexit or even a second referendum.

    "Predicting the ultimate outcome of Brexit remains difficult," said Mark Haefele, chief investment officer at UBS Global Wealth Management. 

    "As a result, the longer-term risk-return outlook for UK equities looks uncertain and we still advise being nimble on sterling."

    The pound fell half a percent against the dollar to $1.2434 and weakened 0.2 percent against the euro to 88.41 pence. 

    The Supreme Court's decision called Johnson's suspension of parliament unlawful and said MPs should return to a sitting. Parliament is due to resume at 14:30 GMT on Wednesday.

    Al Jazeera's Rory Challands, reporting from Westminster, said in normal times a prime minister would have resigned over such a decision or the opposition would have taken the opportunity to introduce a vote of no confidence, but neither event seems imminent.

    "Jeremy Corbyn, who is the leader of the opposition Labour Party, has said that the priority is to hold Boris Johnson to account, to basically push him to abide by the legislation that was passed just before the parliamentarians went on their prorogation suspension that demands that he either gets a deal with the EU before October 31 or he has to apply to them for an extension.

    "Only once that has been settled, the opposition has said, will they push for a vote of no confidence or a new election".

    After the ruling, the pound strengthened as much as 0.6 percent to $1.2504 and not far from a two-and-a-half-month high of $1.2582.

    But the currency fell back overnight as investors grew wary of the short-term outlook.

    "The main risk now is that we are in a never-ending limbo," said Kit Juckes, an FX strategist at Societe Generale, a French investment bank in London.

    SOURCE: Al Jazeera and news agencies