The pound has made massive ground against all the major currencies as an exit poll suggests the Conservative party are on track to win 368 seats in the UK general election.
If the exit poll turns out to be largely accurate, the Tories could secure a majority of 86 seats. The pound surged past the $1.3400 mark, and hit a level last seen in May 2018. EUR/GBP took a hammering and fell to its lowest level since July 2016.
Traders are cheering this exit poll for a couple of reasons. The Conservatives are pro-business, plus, all the Conservative candidates in the election have pledged to back Boris Johnson’s Brexit deal, so there is a belief that the UK should have an orderly exit from the EU. Brexit was at the heart of this election, so if Boris Johnson secures a comfortable majority, it should lift the cloud of uncertainty that has been hanging over the British economy for many years.
In recent months we have seen the UK unemployment rate fall to level on par with the 1970’s, and average wage growth is easily higher than inflation, but all the while the pound has failed to make serious headway because of Brexit-related uncertainty. Depending on whether the exit is poll is on target, this could be the beginning of sterling’s return to form, as there is a view that there are plenty of investors waiting in the wings for the UK to have a smooth departure from the European trading bloc.
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