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Pound Rockets as Conservatives Gain Majority

December 13, 2019 8:17 am | Modified December 13, 2019 8:19 am
Brexit, EUR, GBP, USD | BY Ashleigh Fox

The Pound surged across the board in the later hours of Thursday and throughout Friday morning after the Conservative Party secured a majority as many polls had anticipated. Once the exit polls were released, indicating a landslide Tory victory, the Pound jumped to near three-and-a-half-year highs versus the Euro (GBP/EUR) and to the highest level against the US Dollar since May 2018. GBP/EUR reached a high of 1.2077, while GBP/USD hit levels of 1.3514.

Now, the Conservative Party will attempt to pass its Brexit deal in the coming weeks to rule out a no-deal exit on January 31st. Following that, Prime Minister Boris Johnson will be tasked with organising trade arrangements before the close of 2020. The government has previously stated it won’t extend the deadline past the end of the year, but EU representatives have been reported as saying it would be impossible to complete in 11 months.

Boris Johnson said he can ‘absolutely guarantee’ to get an agreement with the EU regarding its future relationship, before the end of 2020. Meanwhile, head EU negotiator Michel Barnier said in a leaked audio recording: ‘It is unrealistic that a global negotiation can be done in 11 months, so we can’t do it all. We will do all we can to get what I call the “vital minimum” to establish a relationship with the UK is that is the time scale.’

The Pound will likely be sensitive to further Brexit headlines as the Prime Minister attempts to negotiate in the year ahead, but in the short-term, Sterling may be able to retain its recent gains.

Strategist Seema Shah was reported in the Financial Times as saying: ‘The market is now pricing in some certainty about UK politics but, more importantly, some certainty about Brexit. This should be a path to a stronger economy, at least in the short-term.’

Hopefully given the market should soon have some Brexit certainty and clarity, investment may be boosted in the UK and economic fundamentals could improve.

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