Sterling jumped 1.5 per cent to just shy of $1.25 in a rare day of meaningful strength for the currency, having fallen 6 per cent in October. It also rose 1.2 per cent against the euro, pushing the single currency below 89p for the first time since the flash crash on October 7.
In a volatile London session, investors wrestled with the implications of the High Court defeat, which delivered a setback to Prime Minister Theresa May’s timetable for Brexit.
Political and market analysts still expect MPs to approve Article 50 — the official trigger for the two-year negotiations on Britain’s EU exit — although the House of Lords could prove a stumbling block and affect the government’s timing. [...]
The pound gave up some of its gains after it emerged the government would appeal the ruling at the Supreme Court, but then received another boost with publication of the BoE’s quarterly inflation report.
The bank left interest rates unchanged, as expected, though added that rates could move in either direction and it would have a “limited tolerance” for rising inflation. It upgraded growth forecasts for this year and 2017.
That hit prices for gilts, with the yield on the benchmark 10-year UK government bond rising 8 basis points to 1.26 per cent, moving closer to the pre-referendum level of 1.37 per cent. [...]
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