The pound jumped against the dollar and euro yesterday after the High Court in London ruled that parliament must approve the start of Britain’s withdrawal from the European Union.
Sterling — which has tumbled to multi-year low points against its main rivals since Britain voted June 23 for Brexit — surged above $1.24.
However, the pound’s big jump weighed on London’s benchmark FTSE 100 index which has won strong support since the referendum outcome as the weak currency benefited exporters. It closed down 0.8% at 6,790.51 points.
The court ruling has “made triggering Brexit a lot trickier and has given sterling a massive shot in the arm”, said Neil Wilson, markets analyst at ETX Capital.
Downing Street said it was “disappointed” at the decision and would appeal, with the case now likely to go to the Supreme Court before the end of the year.
Meanwhile, the Bank of England yesterday hiked its economic growth forecast for next year, as it froze its key interest rate at a record-low 0.25% and left stimulus unchanged.
The BoE raised its prediction for 2017 GDP expansion to 1.4% from 0.8% as early fears of a sharp slump due to the shock of the June Brexit vote failed to materialise.
Ahead of the decision, a closely-watched survey yesterday showed output in Britain’s key services sector rose last month despite costs rising at the fastest rate in more than five years.
The Markit/CIPS services purchasing managers’ index (PMI) hit 54.5 in October, up from 52.6 in September and above analyst expectations of 52.5.
Meanwhile, markets elsewhere struggled with uncertainty over next week’s presidential election sending investors rushing for the sidelines, pushing safe havens such as the yen and gold higher.
Frankfurt shed 0.4% at 10,325.88 points, while Paris dipped 0.07% at 4,411.68 points.
Wall Street was also in the red in midday trading, with the Dow off 0.01%.
With just days to go until voting on November 8, maverick tycoon Donald Trump has narrowed the gap with market-favourite Hillary Clinton, whose lead had once been considered unassailable, upending early confidence.
The former secretary of state is considered by most investors to be a safer, more stable bet than Trump, who is seen as a loose cannon.
The rush for safety saw gold prices climb back above $1,300 an ounce Wednesday for the first time since the start of October.
Fears of a Trump presidency has led to speculation the Fed could hold off a December rate increase — which has been largely priced into markets — owing to fears about his impact on the economy.

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