By Jemima Kelly and Anirban Nag
LONDON Oct 13 Sterling traded close to a record
low in trade-weighted terms on Thursday, kept under heavy
pressure by worries that Britain will undergo a "hard Brexit"
that will sever ties with Europe's single market.
Lawyers leading a bid to force the government to seek
parliamentary approval before formally starting the process that
will take Britain out of the European Union told the High Court
on Thursday that the June 23 referendum had no constitutional
foundation, and was merely "advisory".
The case, which government ministers have called an attempt
to subvert the democratic process, had little impact on the
pound on Thursday. A final decision is not expected for some
weeks, as whichever side loses is likely to appeal to the
Traders said that as both the timing and the outcome of the
hearing were so unclear, investors - who dislike political
uncertainty - would steer clear of the pound.
"If the court decides that parliament should be allowed to
vote, sterling could rally on speculation that lawmakers may
vote against triggering Article 50," said Charalambos Pissouros,
senior analyst at IronFX Global, referring to the formal trigger
for the Brexit process which Prime Minister Theresa May has said
will come by the end of March.
"On the other hand, should the Court rule that the
government can proceed alone, this could be the trigger for the
next leg lower in sterling."
The pound traded up 0.1 percent on the day at $1.2224
and down 0.2 percent against the euro at 90.36 pence
Most investors would prefer a "soft" Brexit scenario in
which Britain keeps in or close to the EU's single market and
retains many trade and business benefits, and so are sensitive
to any signs that the process is moving in the opposite
The pound has sold off sharply in the last two weeks on
concerns the government will negotiate for an exit that favours
tighter immigration controls over free trade, thereby hurting
the foreign investment needed to fund Britain's huge current
Mohamed El-Erian, chief economic adviser of Allianz, said on
Wednesday the possibility of sterling hitting parity with the
dollar should not be ruled out.
On a trade-weighted basis, sterling was at 73.8, not far
from the record low of 73.383 it struck on Tuesday.
Sterling has shed 18 percent against the dollar since
Britain's shock vote in June to leave the European Union.
Year-to-date it is the second worst performing currency of
30-plus tracked by Thomson Reuters Datastream, according to
In a signal that the slide may be starting to push up
inflation and hurt consumer spending, Britain's biggest retailer
Tesco has pulled top-selling Unilever products
from its website in a row over pricing.
They included Marmite, a brown yeast-extract spread which is
among Britain's most iconic brands.
"The current situation is anything but stable and another
slide (in the pound) would feed concerns far more than it would
help the UK's competitive position," said Kit Juckes, macro
strategist at Societe Generale."
"And so, it's worth remaining short sterling against both
the dollar and the euro."
(Additional reporting by Abhinav Ramnarayan; editing by John