LONDON • After months of bad news for the pound, the currency got a double boost yesterday, pushing it to its biggest advance since July.
The sterling pound climbed against all of its 16 major peers as a UK court ruled the government must hold a vote in Parliament before starting the two-year countdown to Brexit, and the Bank of England (BOE) said it is no longer expecting to cut interest rates again this year. That ate into the pound's 15 per cent drop versus the dollar this year, the worst among major currencies.
"There's finally some good news for the pound," said Ms Kathleen Brooks, a research director at brokerage City Index in London.
"The market has rapidly priced out the prospect of a rate cut, given the much more hawkish-than-expected inflation report," while the court ruling brought "a good type of uncertainty" as it may delay the triggering of Brexit.
The pound rose 1.4 per cent to US$1.2473 in early afternoon in London, the biggest increase since July 14. It earlier climbed to US$1.2494, the highest since Oct 7.
That pared the currency's slide since the United Kingdom's June 23 vote to quit the European Union. The sterling strengthened for a second day versus the euro, gaining 1.6 per cent to 88.77 pence.
The UK currency climbed on speculation the High Court ruling will delay or soften the terms of the nation's exit from the EU.
Government bonds fell as BOE officials raised their forecasts for growth and inflation, and indicated concern that higher consumer prices may even warrant tightening policy at some point.
British Prime Minister Theresa May had said that she intended to trigger Article 50 of the Lisbon Treaty, which begins a two-year countdown to the actual separation, by the end of March.
The pound dropped 5.6 per cent versus the dollar last month, the worst performer among currencies tracked by Bloomberg, amid speculation the government would prioritise immigration controls over free access to the EU single market during its exit. The government said it will appeal against the High Court ruling.
"It does shift the odds somewhat that the process is going to be delayed and given that Brexit is the issue that has weighed on the pound, it means there's a bit of a relief rally on that," said Mr John Hardy, head of foreign-exchange strategy at Saxo Bank in Denmark.
The ruling came about two hours before the BOE said it would keep the monetary policy unchanged. The decision to maintain the key interest rate at a record-low 0.25 per cent was forecast by all but four of 60 economists surveyed by Bloomberg.
The central bank lowered its key interest rate for the first time in seven years on Aug 4 to cushion the blow from the UK's decision in June to leave the EU. It also announced an increase to its asset-purchase target.