Pound traders are braced for action as lawmakers return from holidays to battle Prime Minister Boris Johnson’s move to suspend Parliament.

Sterling may recover some ground if efforts to fight Johnson’s Brexit strategy have any success, strategists say. Traders will be watching court challenges from Tuesday, when lawmakers will reconvene in the House of Commons to combat a no-deal Brexit before the month-long suspension kicks in.

“This is a make or break week for the opposition parties here,” said Peter Chatwell, a strategist at Mizuho International Plc. “Parliamentary arithmetic, and the speaker, should allow them to make progress and I expect there to be a small rally in the pound.”

The U.K. currency hit the lowest since January 2017 earlier this month, and has seen some big swings since then as the new prime minister makes his mark. A measure of sterling volatility over the next three months, covering the Oct. 31 deadline to leave the European Union, has surged to the highest this year.

Lawmakers hope to block no-deal by forcing Johnson to ask the EU for an extension in the event an accord has not been agreed by end-October. Chatwell warns it is “highly unlikely to be plain sailing.” The last time Parliament attempted to find alternative solutions in March, none of the Brexit options got a majority and the deadlock continued.

The pound has stabilized at around $1.22 after slumping on news of the Parliament’s suspension from Sept. 12 to Oct. 14. A frantic series of court proceedings in Edinburgh, London and Belfast will try to overturn that, while more event risk comes in the form of testimony from Bank of England policy makers plus services data that will show the latest impact of Brexit on the U.K. economy.

While trading continues to be “held hostage by politics,” a lot of the options from here are positive for the pound, according to Jordan Rochester, an analyst at Nomura International Plc. He is recommending going short on euro-sterling, with either a court ruling against Johnson or a successful bid by MPs to prevent no deal set to boost sterling.

Jeremy Stretch, head of G-10 currency strategy at Canadian Imperial Bank of Commerce, also thinks market sentiment will improve.

“While the time is short, I would expect something to pass through the House, prior to the start of the prorogation period,” said Stretch. “That should encourage markets to pare back hard-exit expectations, boosting sterling in the process.”

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