Pound up in GBP/EUR and USD in the wake of general election announcement
There’s a general election on the way and after Theresa May’s surprise announcement stating that citizens will be off to the polls again in June, sterling reacted positively.
Sterling Rallies
During what was a volatile trading session, sterling eventually rallied to its highest level since October. This despite May saying that she was calling the election with a great deal of ‘reluctance’. This will have come as a massive relief to some after a great deal of uncertainty earlier in the day.
Once the office of the Prime Minister announced that she would be making a statement, the false speculation that it would be concerning her health saw the pound slip to just $1.2550. Once the statement was made, however, with May citing that she needed a clear mandate in order to go into the complex Brexit negotiations, sterling went up to as much as $1.2904. This marked the strongest day for the currency in six months.
GBP/USD Live 5 Minute Price Chart
GBP/EUR
It also fared well against the Euro, rising to €1.1936. The highest it has been in four months. The pound even managed to pass right through the 200-day moving average. This is seen as a key indicator of the currency’s resistance. It was passed for the very first time since the referendum on the UK’s EU membership was held back in June last year. The early election was even described as being a ‘game changer’ for sterling by Deutsche Bank.
The rise in the pound is being put down to the fact that an early election will give the country a greater deal of political stability and reduce uncertainty, both of which are key to fluctuations in a currency. The markets also seemed to think that the likelihood of what is being described as a ‘hard Brexit‘ has also been reduced. The government themselves would admit that this is a long way from being certain however.
Welcome Boost For GBP
The gains made by the pound were welcomed by the government, specifically by the chancellor himself, who stated that the bounce enjoyed by the pound clearly showed that the markets had confidence in the future of the country. Considering that the Conservatives are the clear favourites in the election, Philip Hammond went on to say that the confidence was due to the markets believing that a Conservative government with a mandate would help secure Britain’s future and the success of the pound.