Sterling traded close to a four-week high today and was heading for its best week since March, having jumped after England’s High Court put a spanner in the government’s plans to forge ahead with Britain’s exit from the European Union.
The battered pound has clawed back 2.5 percent against the dollar this week, with yesterday’s court ruling adding to a run of political and economic developments perceived as positive by investors worrying over the economic fallout of Brexit.
The pound surged to a four-week high close to $1.25 on Thursday after the court’s decision that the government needed parliamentary approval to trigger Article 50, which will formally start the process of exiting the EU.
Investors are hoping that Britain might now be able to avoid an economically disruptive “hard Brexit”, reckoning lawmakers – most whom supported staying in the EU in June’s referendum – will now be emboldened and will push for Britain to keep access to Europe’s single market.
The pound started climbing earlier in the week when Mark Carney said he would stay as head of the Bank of England for an extra year to help with a smoother Brexit negotiation process.
It was further boosted on Thursday by the BoE’s decision to scrap its plans to cut interest rates and raise its forecasts for 2017 growth and inflation, and by robust data from Britain’s services sector.