LONDON – The pound has recovered to its highest level since the general election on Wednesday as investors continue to get over the initial shock of the vote and look to the increased possibility of a so-called ‘soft Brexit’ following the Conservative Party’s failure to win a majority.
Sterling dropped sharply on Thursday evening after the exit poll initially showed that no party would win a majority in the House of Commons, with the prospect of a period of uncertainty about who would govern the UK troubling the market. Sterling traded at $1.2950 against the greenback prior to that exit poll.
However, the currency stabilised on Friday afternoon after it became clear that Theresa May would seek to form a new government, likely propped up by the Democratic Unionist Party.
Since then, the currency has fought back against the dollar, and is now at its highest level since that initial drop.
By Wednesday morning, sterling has hit 1.2782 against the dollar, a gain of just over 0.2% from the day’s open. Here is the chart:
“The Pound popped higheron Tuesdayas currency investors remained cautiously optimistic over a softer Brexit following last week’s UK election outcome, resulting in a hung parliament. A vulnerable US Dollar played a role in the upside with short-term bulls sending the GBPUSD towards the 1.2775 resistance.” Lukman Otunuga, a research analyst at FXTM writes in an email on Wednesday morning.
“Although the political uncertainty in the UK and pending Brexit negotiations are still in focus, much attention will be directed towards the UK jobs report this morning.”