Following the shock judgment, the pound rose about 0.5 percent against the euro – going from lows of £1 being worth €1.12970 at 9am, to €1.13532 at 10.40am. The pound moved against the dollar by similar amounts – rising from $1.2416 before the ruling and as high as $1.2485.
But both jumps have cooled as the markets wait to see what happens next.
But analysts said the ruling was a positive for avoiding future unpredictable decision-making by Downing Street.
David Cheetham, chief market analyst at XTB, said: “Had the court ruled that the matter was not justiciable, then the PM may well have felt further emboldened to pursue unorthodox tactics to keep no-deal on the table and engage the UK in a game of high-risk brinkmanship.”
But traders warned Brexit uncertainty remains high as the UK prepares to leave the bloc on October 31.
Pound to euro: Sterling rises after Supreme Court decision
Pound to euro: The Supreme Court ruled Parliament has not been prorogued
Fiona Cincotta, senior market analyst at City Index, explained: “The reason the pound hasn’t rallied higher is quite simply because the level of political uncertainty in the UK remains extremely elevated.
“This ruling also undermines Boris Johnson’s strategy with EU negotiators. He is suddenly in a considerably weaker position.”
TD Securities’ European head of currency strategy Ned Rumpeltin said: “I wasn’t surprised to see the currency hop higher but I also wasn’t surprised to see cable – pound vs the dollar – run out of steam ahead of $1.25.”
Mr Johnson is now likely to head to his Conservative party’s annual conference at the weekend and rally his troops in preparation for a likely national election, which will be a bitter fight over Brexit.
Pound to euro: The Supreme Court ruled prorogation was ‘unlawful’
Mr Rumpeltin added: “He is going to have to rally his base and he is going to do that around hard Brexit.
“That will be a moment of clarity for the FX market. It will look at the polling and the Conservatives are leading in the polls.”
The pound strengthening also had a slight knock-on effect on the FTSE 100, which was down 8.2 points by lunchtime, which tends to happen when sterling rises, due to several major companies on the leading index trading in dollars.
Simon Harvey, currency analyst at Monex Europe, added: “The probability of the government forcing a no deal exit has been trimmed by the decision, but the extensive repercussions a no-deal exit would have to the UK economy continues to hang around the pound’s neck, capping any optimism.”
Brexit LIVE: Supreme Court hands power to Bercow [LIVE BLOG]
Andrew Bridgen unleashes outrage at ‘disgusting’ Brexit court ruling [REACTION]
Queen in crisis: What does Supreme Court ruling mean for monarchy? [ANALYSIS]
John Bercow has said the Commons will sit again from tomorrow at 11.30am
Speaking about the market reaction to the Supreme Court ruling, Andy Scott, Associate Director at JCRA, added: “The market reaction to the Supreme Court ruling was somewhat muted, with Sterling rising less than half of one percentage point against its major counterparts.
“The limited gains for Sterling reflect that today’s ruling doesn’t change the difficulty in securing a Brexit deal before next month’s EU summit, or the fact that an election looms that could result in a hung parliament. Political uncertainty remains elevated and will keep investors cautious over the direction of Sterling.
“The recent recovery in Sterling – which has risen by four percent versus the Dollar and five percent versus the Euro since hitting its lowest levels since 2016 – reflect an easing of hard-Brexit fears.
“Until such time as there is clarity over Brexit, risks remain two-way for Sterling.”
Britain’s constitution explained
Commons Speaker John Bercow this afternoon revealed the House of Commons will sit on Wednesday after the Supreme Court ruled Mr Johnson’s suspension of parliament was unlawful.
He said: “I have instructed the House authorities to prepare not for the recall – the prorogation was unlawful and is void – to prepare for the resumption of the business of the House of Commons.
“Specifically, I’ve instructed the House authorities to undertake such steps as are necessary to ensure that the House of Commons sits tomorrow and that it does so at 11.30 am.”
Mr Bercow said the regular Wednesday session of Prime Minister’s Questions would not take place.
He added: “However, for the avoidance of doubt there will be full scope for urgent questions, for ministerial statements and for applications for emergency debates.”
Mr Johnson is currently scheduled to be in New York today where he is attending the United Nations General Assembly.