The British pound jumped to a 4 month high in today’s trading against its US counterpart after a snap election was called by British Prime Minister Theresa May for June 6.
At 3.03pm (GMT) the pound was trading at $1.2742 up from $1.2566 in yesterday’s trading.
The reason why the Prime Minister called the election, is to reduce uncertainty surrounding Brexit and her conservative party are expected to win by a landslide which will give them the mandate to push through key changes and put them in a better position surrounding Brexit negotiations.
The pound was under pressure before the announcement but the surged as investors welcomed the news of increased political stability.
“With Brexit negotiations on the cards, the Prime Minister has sought to strengthen her hand by calling a General Election. A successful election in June would likely provide May with a larger majority, one that would ease the process of agreeing terms of negotiation in Westminster”. Noted Nancy Curtin, chief investment officer at Close Brothers Asset Management
“Unless we see a political upset, a greater source of clarity and confidence will be welcomed by investors as Brexit discussions get underway in earnest.” she added.
According to some analysts, this maybe just the start of things to come, and as Brexit negotiations begin with a new and stable government the pound will make further gains.
"Everything points to the Tories being elected with a substantially increased majority which will give the Government a firm mandate and put it on steadier, more solid ground as it begins the difficult, complex work of negotiating Brexit. This can only reduce uncertainty and the potential for hiccups over the next couple of years," said Paul Mumford, a fund manager at Cavendish Asset Management.
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