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Sterling gains as Supreme Court decision dims chances of no-deal Brexit

The British pound rose after the U.K. Supreme Court declared Prime Minister Boris Johnson's decision to suspend Parliament as unlawful, dimming chances of a no-deal Brexit on Oct. 31.

The ruling marks another defeat for Johnson, who is now reportedly facing calls to step down. The decision, which follows appeals on two divergent decisions from Scottish and English courts, gives lawmakers more time to challenge Johnson's Brexit plans.

In a unanimous ruling of 11 justices, the Supreme Court concluded that Johnson's decision to advise Queen Elizabeth prevented Parliament from carrying out its constitutional functions "without reasonable justification," according to Supreme Court President Brenda Hale.

"Parliament has not been prorogued," Hale said, adding that it is now up to the Speaker of the Commons and the Lord Speaker to decide what to do next. The U.K. House of Commons Speaker John Bercow said the lower house of Parliament will reconvene Sept. 25, Reuters reported.

Johnson said he "strongly disagreed" with the decision, which he thought was not the right verdict.

Sterling traded 0.4% higher around 11 a.m. ET.

There are downside risks for the pound as Brexit tensions are expected to increase in the coming days, Ned Rumpeltin, European head of foreign exchange strategy at TD Securities, said.

Parliament recently passed legislation mandating Johnson to ask Brussels for an extension if he fails to reach a deal by Oct. 19.

The prime minister will now be under increased pressure to secure a deal with the EU to avoid another extension, though the two sides are unlikely to reach a deal in time for the European Council's meeting on Oct. 17-18, said Martin Beck, lead U.K. economist at Oxford Economics.