LONDON - The pound dropped more than 1 per cent on Wednesday versus the dollar, ceding gains made the previous day after the Supreme Court's ruling against Prime Minister Boris Johnson, as investors priced in many more months of Brexit and general election risk.Johnson was dealt a blow by the UK top court, which ruled on Tuesday he had unlawfully suspended parliament, sending the pound half a percent higher.
"But we still have Johnson in place, the opposition still doesn't want a general election and we are still cornered with respect to Brexit, it's taken a day for that to sink in." Johnson now faces a hostile parliament that has returned to sitting, and his opponents are seeking new ways to block him from pursuing a no-deal Brexit that they fear would cause huge economic disruption.
"The market is pricing in an increased risk of a no-deal Brexit," said Thu Lan Nguyen, an analyst at Commerzbank. The one-month volatility gauge, capturing the EU summit risk, slipped to 10.9 vols, down from the 12.3 vols level hit before Tuesday's ruling, but the decline appears to have stalled.
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