Theresa May and her Government could face fresh legal challenges ahead of the Supreme Court ruling next week with the Lawyers will argue that the Referendum in June was a question regarding EU membership, and not lesser forms of membership such as the EEA.
If the case goes ahead, the UK may be forced to accept lesser membership which would prevent Theresa May from pushing ahead with a complete removal from the single market.
The news, if successful, would likely be viewed positively for the Pound, and would remove much of the uncertainty for UK business and investment.
Theresa May’s official spokeswoman has made it clear on the Government’s Brexit plans signalling a complete removal from the single market and any subsequent memberships.
“Our position is clear, which is that the UK is only party to the EEA agreement in its capacity as an EU member state and once we leave the European Union we will automatically cease to be a member of the EEA – that is the legal framework.”
Despite the obvious plans from Government for a hard Brexit, the Pound has recovered from the day’s low and is now trading above 1.17 against the Euro.
The Pound could find further support if a second legal challenge is presented to Theresa May, as investors remain concerned that a hard Brexit would damage the UK economy and therefore any obstacles that prevent it would be welcomed. If the UK were to retain access to the single market through the EEA the Pound could find added support as investor confidence is restored.
Bank of England’s Mark Carney has also suggested that the UK push ahead with a transitional Brexit to cushion the impact to the economy. The comments were made during a hosted dinner party for 50 investment bankers last Monday. His comments were critised by pro-Brexit supporters including MP Michael Gove. Former UKIP leader Nigel Farage has echoed previous comments calling it “an attempt to scuff Brexit and undermine the 17 million that voted for it”.
A transitional Brexit may take longer to complete but may soften the uncertainty helping the Pound to regain further ground. If the Government are unsuccessful in overruling the Brexit decision its unlikely Parliament will allow her to go ahead with a hard Brexit under any circumstance.
Investors will be waiting for the result of next weeks Court hearing with scrutiny, which may result in Sterling volatility ahead of the hearing.