The pound renewed its surge on Thursday, as traders continue to price in the increasing likelihood that prime minister Boris Johnson’s Conservative party will gain a majority in next week’s general election.
After passing the $1.30 milestone and reaching its highest level since May on Wednesday, sterling on Thursday climbed nearly 0.3% against the dollar (GBPUSD=X) to above $1.31.
The currency was also up 0.1% against the euro (GBPEUR=X), reaching €1.18 — its highest level since May 2017.
As next week’s general election draws closer, Johnson has thus far managed to avoid any of the major blunders that would weaken his chance of a majority.
The prime minister and US president Donald Trump this week sang the same tune on a post-Brexit National Health Service, with both leaders stating that it would not be up for sale as part of a trade pact.
The avoidance of controversy allowed the pound to break to the upside yesterday, said Michael Hewson, the chief market analyst at CMC Markets UK.
“As a result of that, currency markets appear to be starting to price out the prospect that Labour might win a majority at next week’s election,” Hewson said.
A Conservative party win would also pave the way for the passing of Johnson’s Brexit deal, and thus raises the prospect of a smooth exit from the European Union in the short term, Hewson noted.
“There is, of course the potential for many more twists and turns between now and polling day, and a day is a long time in politics, let alone a week, and the polls haven’t always been accurate,” he said.
“Furthermore, any decent trader will tell you it is never over until the fat lady sings, but for the here and now, she does appear to be starting to clear her throat, and markets are starting to reflect that.”