Sterling has soared as the Conservative Party won an overall majority in the general election.
As traders dared to hope that the party’s strong majority would remove uncertainty over Brexit, the currency leapt 2.2% to $1.34, its highest level since May last year. The pound also jumped to a three-and-a-half-year high against the euro.
The BBC's economics editor, Faisal Islam, said the scale of the Tory victory had calmed the mood of the financial markets.
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“The most disruptive form of no deal has been taken off the table,” he said. “The market reaction is a reflection not just of the result, but of the fact that [a big majority] gives the prime minister room for manoeuvre.”
Capital Economics chief UK economist Paul Dales added that “passing a Brexit divorce deal in the coming weeks would remove any risk of a no deal Brexit on 31 January, reduce the immediate uncertainty and lift business investment at least a bit”.
He added that “in a Budget in February, the Conservatives would probably give the economy an extra kick by raising public investment by up to £20bn”.
Neil Wilson of Markets.com joined the cheer, telling The Guardian that: “For the markets and for business this is the perfect result – a clear majority for the Tories, the Corbyn risk nullified entirely, a major reduction in uncertainty around Brexit and even a quick Budget to inject the economy with some added impetus.”
He added: “The only doubts are around the next phase of Brexit – the future relationship – but with a large majority the government will be in a better place to negotiate and do what it needs to do.”
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