LONDON (Reuters) – 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.
FILE PHOTO: A shop assistant counts piles of British Pound Sterling banknotes at an Apple store in London, Britain November 18, 2017. REUTERS/Russell Boyce
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% at $1.3324 GBP=D3, 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 1.3% at 83.43 pence EURGBP=D3, having skyrocketed to a 3-1/2-year high of 82.78 pence.
It had jumped more than 2.5% 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.
“From a risk-reward perspective it makes sense to take profit,” he said.
But Gkionakis believes sterling could rise to $1.40 as there was a chance Johnson could now seek to extend the post-Brexit transition period beyond December 2020 in order to complete negotiations on a future trade deal with the EU. During the election campaign, the prime minister had pledged not to do this.