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Pound hits two month high after election

Article By: ,  Financial Analyst
May 8, 2015 1:26 PM

The pound hit a two-month high this morning when the FTSE 100 opened in London.

Sterling went up nearly two per cent to $1.55 against the dollar – the biggest jump since 2009 – and then pulled back. 

As election results trickled in this morning, the BBC forecast that the Conservative party would have a slim majority. This news was reflected when the financial markets opened, and investors welcomed the end of election uncertainty. According to experts, the projected results meant that the government's agenda would likely remain consistent.

Analyst Jason Hughes told the BBC: "The market often likes a bit of consistency and stability and if the conservatives are returned to power – be it part of a minority government or as part of a coalition again – they will be able to push through a lot of the policies and approaches that they have done over the last five years in parliament."

The FTSE 250 index also fared well, reaching an all-time high. Bookmaker Ladbrokes, estate agents Savills and housebuilders Countrywide and Berkeley all jumped up about nine per cent at the London opening.

Several companies that expected to be hit by changes if the Labour party had won a majority, have seen their shares go up, reports the Guardian. The party had pledged to introduce policies that would have implications for energy companies, banks, householders, services companies and bookmakers

Experts also warn that, while the end of uncertainty has been good for the markets, the rise is unlikely to last. Since the election results means that a referendum on the UK's membership in the EU is now likely, new challenges could await the pound.

For now, Mr Hughes explained that the current "relief" rally could gain momentum during European trading hours. 

"If you look at the uncertainty that has been in play, almost since the start of the year, but certainly from about mid-February onwards, we've seen a fair bit of pressure on sterling due to the uncertainty of the political landscape locally, he said.

"So I think we will see that relieving bounce."

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