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How the pound’s exchange rate after the UK election will affect you

Edmund Heaphy
Finance and news reporter
The pound has gained against the dollar following the results of the UK election. Photo: Steve Taylor/SOPA Images/LightRocket via Getty Images

The value of the pound has surged to its highest level since May 2018 following the results of the UK general election, but how does the exchange rate affect you?

The pound is now worth almost $1.35 (GBPUSD=X), after it climbed by more than 2.6% on Thursday evening, when it became clear that Boris Johnson’s Conservative Party would win a significant overall majority.

It is also up significantly against the euro, and is now trading at more than €1.20 (GBPEUR=X).

Though the pound had gained throughout the course of the election campaign — mainly because traders were optimistic about a Conservative win — the post-election movements in the value of the currency bring it far above the levels it had seen in recent weeks.

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On Thursday, the currency was trading at around $1.32 and €1.18.

The rate at which currency traders swap currencies has a direct impact on the exchange rate you can get for the pound at banks, post offices, and specialised foreign exchange stores.

As such, you will now get more dollars and more euro when exchanging from the pound, since it is worth more. This makes going on holiday cheaper.

But the value of the pound also can affect household finances: If the pound is worth more, the cost of imported goods from overseas goes down.

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Many common households items on supermarket shelves are imported from overseas, for instance.

Similarly, because oil is priced in dollars, a stronger pound also will make filling up your car with petrol cheaper.

The pound has been extraordinarily sensitive to Brexit developments since the June 2016 referendum, and it is still down significantly since then.

In the weeks leading up to the vote, the currency had been trading as high as $1.46.