Sterling was near a record low in trade-weighted terms yesterday as focus turned to the High Court which will hear a legal bid to force the British government to seek parliamentary approval to trigger the formal Brexit process.
After a steep sell-off in the last two weeks caused by uncertainty over Brexit, the pound surged as much as 1.5 percent against the dollar and the euro yesterday after British Prime Minister Theresa May said she would allow lawmakers some scrutiny over the process.
May had drawn the ire of many in parliament for refusing to divulge her strategy and saying she would trigger Article 50, which sets off the formal departure process, without giving lawmakers a say.
Markets were also relieved to hear her say that she would seek “maximum possible access” to Europe’s single market.
But the pound gave up some of its gains later on Wednesday after May said parliament will not vote on triggering Article 50.
A second hearing in the legal challenge against the government for its stance on Article 50, led by pro-EU investment fund manager, will take place at the High Court on Monday, but it is not clear when a final decision will be made.
Investors fear Brexit could hurt trade and foreign investment needed to fund Britain’s huge current account deficit, one of the biggest in the developed world. This suggests there will be heightened uncertainty around the pound.
Sterling has shed 18 percent against the dollar since Britain’s shock vote in June to leave the European Union.