LONDON: Sterling was well supported on Friday as investors rushed to unwind bets on a weaker pound after a resounding election victory for Prime Minister Boris Johnson’s Conservative Party.
Johnson’s win will allow him to end three years of political paralysis and take Britain out of the European Union in an orderly manner in a matter of weeks.
The pound was last trading up 1.1 per cent at $1.3324, giving up some of the gains it made overnight when it surged to a 19-month high of $1.3516. Against the euro, the pound was up 1.3pc at 83.43 pence, having skyrocketed to a 3-1/2-year high of 82.78 pence.
It had jumped more than 2.5pc after exit polls pointing to the scale of the Conservatives’ win were published, making it at that time its biggest one-day gain in nearly three years.
This was a remarkable jump for a currency that has become extremely volatile since Britain voted to leave the EU in a referendum in 2016.
Vasileios Gkionakis, global head of FX strategy at Lombard Odier, said he had now sold sterling after increasing his holding in the currency when it was languishing at $1.26.
Along with the pound, the mid-cap stocks index FTSE 250 , which is home to many companies with high UK revenues, surged about 5pc to record highs.
Britain’s 10-year gilt yield also jumped to a six-month peak of 0.895pc and was last up 3 basis points at 0.86pc. The gap between Irish and German 10-year government bond yields shrank to its smallest since Jan 2018.
Published in Dawn, December 14th, 2019