Pound Advances to $1.4150 as Boris Johnson Triumphs

2 min read
11 May, 21
Written by Clover4X
Article Highlights:
  • Sterling jumps more than 1% against the US dollar to reach a two-month high
  • GBP/JPY trades at a three-year peak, above 154.00

The Situation in Scotland & The Sterling

The Great British sterling outperformed the large majority of other currencies on Monday after traders and investors eased their concerns over election risks and uncertainties. The sterling rallied to a two-month high against the US dollar yesterday when the pair reached a high of 1.4158.

The focus during the weekend was the outcome of the Scottish election. The SNP won the vote but couldn’t secure a majority. On that issue, SNP leader Nicola Sturgeon said her party will seek another independence referendum. The markets, however, do not expect this to happen any time soon and traders piled onto the sterling’s upside momentum.

Ms. Sturgeon, newly re-elected as Scotland’s First Minister, remains determined to pursue Scottish independence and vowed to press for a second independence referendum once the pandemic threat subsides.

sterling

Tories secure a series of election victories

Meanwhile, Boris Johnson and the Tories secured a series of election victories, which additionally strengthened the pound as market participants now barely expect any election surprises. Moreover, Mr. Johnson already announced a major reopening of the UK economy on May 17, which has spurred optimism that the recovery could take off in the second quarter.

As election uncertainties faded, the pound jumped against other currencies, not just the greenback. The GBP/JPY advanced 1.3% on Monday to reach a three-year high at 154.03. The GBP/JPY pair has been in a solid upside swing since the market meltdown in March last year. Since then, the British pound has appreciated by 24% against the Japanese yen. GBP/AUD, GBP/CHF, and GBP/CAD also moved higher by over 1% each.

The UK currency was supported by the Bank of England which raised its forecast for the British economy. Last week, the UK’s central bank announced it expects a faster rebound, and to prevent the economy from overheating, it will soon start tapering its bond-buying programme.

Governor Andrew Bailey forecasted the UK will grow the most since World War Two. The Bank of England now predicts the British economy will expand by 7.25%, an upward revision of 5.0% from February.

 

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