UK PM awaits verdict on prorogation

Summary:

• GBP mixed with Brexit still in focus

• UK Supreme Court to rule on legality of prorogation

• Oil remains support as Trump blames Iran

Boris Johnson has said that before deciding whether to recall parliament he will “see what the judges say” as the Supreme Court will hear appeals to determine whether the decision to suspend parliament for five weeks was against the law. So far London’s High Court has said it was not a matter for courts but north of the border Edinburgh’s Court of Session has stated its belief that the PM acted unlawfully. The legal situation here is getting complicated with a scant degree of precedent to go off and with the PM remaining coy there is a suggestion that he may not even abide by the ruling should it come out against him. 

After hitting its highest level against the US dollar since July yesterday, the pound pulled back a little during Monday’s trade but this was more due to a strengthening in the buck than any real pull back in sterling. The pound has been on a strong run in the past month, outperforming all its G10 peers with the currency buoyed by the belief that the prospects of a no-deal Brexit was once more receding into the realms of being highly unlikely. While the risk premium in the pound for a “hard Brexit” has significantly decreased in recent weeks, it can’t be completely eliminated until more is known on how far Boris Johnson is willing to push the legal limits, and as such, the upside in sterling may be capped for the time being. 

Iran blamed for Saudi attacks

Donald Trump has wasted little time laying the blame for the attacks on Saudi Arabian oil facilities at the door of Iran. When asked if Iran were behind the attack the US president said “it’s looking that way” as well as sending conflicting messages that the US were “locked and loaded” but would “certainly like to avoid” a military conflict. Conspiracies are doing the rounds that a war could be part of Trump’s pre-election plan to sure up his support ahead of next year’s vote. However, the logic behind this becomes more questionable when you consider that targeting the Middle East region would cause more upside in energy markets and risk upsetting a large part of a nation that is traditionally strongly averse to higher prices.