The U.K.'s High Court ruled the government must gain parliamentary approval to begin negotiations around the country's exit from the European Union, leading to a rise in the pound sterling and FTSE 250.
The High Court published its ruling Thursday stating that the U.K. government does not have prerogative to trigger Article 50 — which will begin formal negotiations around the so-called Brexit — without Parliament's go-ahead.
The pound sterling rose about 1.5% against the dollar following the decision, to around $1.25. It closed at $1.244. The FTSE 250 increased 1.6% before ending the day with a 0.72% gain.
“This was unexpected and goes against the weight of legal opinion before the decision,” said David Page, senior economist at AXA Investment Managers, in a news release. “The government can appeal this decision, and the Supreme Court said it has already set aside time for an appeal,” between Dec. 5 and Dec. 8. The government may also ask Parliament for the right to trigger Article 50.
Last month, U.K. Prime Minister Theresa May set a March 2017 deadline of triggering Article 50. Mr. Page said this deadline could be at risk if the decision is upheld.
In a report Wednesday, Moody's said the U.K.'s Aa1 sovereign rating could be downgraded if the U.K.'s loss of access to Europe's single market were to materially weaken medium-term growth or if the credibility of U.K. fiscal policy were to be undermined.
The rating agency's central view is that the U.K. medium-term economic outlook will be weaker under any scenario, but it warned that the scale of the impact on growth prospects will depend on the shape of the U.K.'s new trading relationship with the EU.
Also on Thursday, the Bank of England's Monetary Policy Committee announced that U.K. interest rates will be held at 0.25%.