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The UK Supreme Court ruled that the parliament in Westminster must approve Brexit by a bill. What are the implications?

Here is their view, courtesy of eFXnews:

On Tuesday, the UK Supreme Court will rule on the government’s Brexit plans. The case is less of a market focus than the original hearing in November, but could be just as important for the Brexit process.

What issues are at stake?  The ruling concerns the appeal of government lawyers against the High Court’s judgment in November that parliamentary approval must be sought before the triggering of Article 50 (A50), the political process governing Brexit.

The Supreme Court is widely expected to uphold the original High Court decision and reject the government’s appeal. The government has confirmed that if this is the case, it will introduce primary legislation to enable the triggering of A50 along the lines of a very narrow bill with limited or no restrictions over the government’s negotiating position from parliament.

Scenarios and market implications (assuming government loses appeal)

Scenario 1:  Government loses appeal but wins parliamentary vote on narrow Brexit Bill – 50% probability
Scenario 2: Government loses appeal but loses the parliamentary vote on narrow Brexit Bill. Snap general election then most likely outcome. – 20% probability
Scenario 3:  Supreme Court rules that devolved authorities must be consulted before triggering of A50 or 1972 EU Communities Act repealed or ECJ opinion asked – 30% probability

The bottom line is that details rather than headlines will matter tomorrow. Our base case remains that the government will lose the Supreme Court appeal but succeed in introducing a narrow bill enabling a triggering of Article 50 by the stated end-March deadline.

Should scenario 2 or 3 materialize, however, the government’s Brexit plans would be compromised, and an at least short-term correction in sterling would be justified.

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