GBP Traders Turn to UK Court Hearings on Brexit
A crucial court case this week will decide whether UK. Prime Minister Theresa May must call a parliamentary vote before triggering Brexit. The Court decision is not about whether the Parliament will reject Brexit, but over whether it will participate in the negotiations proceedings with the UK government in its 2-year discussions with the EU about withdrawing from the bloc. The process starts next March.
Last month, the British pound rallied against all currencies after a case ruling by the High Court that the UK government must call a vote in Parliament before Brexit negotiations start with the EU in March.
In the next 4 days, the UK government's top legal experts will seek to reverse last month's High Court verdict. The UK govt lawyers will argue that the June Referendum to take Britain out of the EU must not be amended in Parliament in any shape or form and that Parliament must NOT have a say before Article 50 of the European Union's Lisbon Treaty is invoked to formally start Britain's withdrawal from the EU. The Supreme Court will decide in January.
The most important reason PM May wants to avoid the Parliamentary vote is the reluctance to reveal her negotiating hand with EU counterparts. May is attempting to keep tight control on the divorce proceedings, telling lawmakers repeatedly she won't elaborate on her negotiating stance to avoid giving her EU counterparts the upper hand.
May has pledged to trigger Article 50 by the end of March, and is seeking to avoid a potentially time-consuming process in the 2 houses of Parliament. UK ministers argue for the executive privilege, which is known in the UK. as royal prerogative – allowing the government to bypass lawmakers in court.
This will be an important opportunity for Theresa May to demonstrate she is a strong, powerful politician who makes commitments and will follow through them and isn't willing to be impacted by outside forces such as the plaintiffs in last month's High Court case that the government lost.
European Union versus the Single MarketSome MPs who voted for the UK to remain in the EU in June say that if Parliament wins the court case to negotiate Article 50 with the government, they will argue that retaining membership of the European single market should be integral to Britain's Brexit plan. The single market joins the 28-member EU with Norway, Iceland and Liechtenstein in a free- trade area that also has common regulations and product standards.
But PM May has refused to commit to keeping Britain in the single market or the customs union, which binds the EU and Turkey in a trading zone with common external tariffs.
Another reason that PM May oppose a vote in Parliament is the longstanding fractures in her Conservatives Party, which helped bring down the party's past three prime ministers: David Cameron, John Major and Margaret Thatcher. If the Supreme Court decides to give Parliament the green light to vote on Brexit negotiations, more divisions are likely to surface inside the Conservative Party.
How will the Court Hearing Impact the British Pound?Any indications that the hearings are moving in the direction to maintain last month's court ruling in favour of Parliament having a vote is likely to further strengthen the British pound against the US dollar and other currencies. If on the other hand the UK govt lawyers present strong arguments for reversing the decision, then we could expect the pound to lose ground, especially against the USD and Japanese yen.
Once again, it is important for readers to understand that the Court ruling is not about reversing Brexit, but over whether the Parliament will have the power to negotiate with the UK govt on the terms it will exit the EU. If the Supreme Court rules that last month's High Court decision is to be maintained, then Parliament begins a long drawn negotiations process in January, which will make Brexit process slower and complicated and the Conservatives Party more divided.
The Supreme Court will make its ruling in January.
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