LONDON — The pound is climbing on Thursday, extending the big gains already seen since Prime Minister Theresa May called for a general election to be held on June 8. May called for the election on Tuesday, sending the pound over 2% higher on the day.
It then saw a broadly flat day on Wednesday as parliament voted to approve the election, but has begun to pick up again on Thursday, gaining more than 0.3% on the dollar in morning trading to hit $US1.2825, matching highs not seen since October 2016.
Here is the chart:
Sterling’s rally since May’s has been partially driven by a belief in the markets that May increasing her majority will allow her to take a more conciliatory stance on Brexit, and move away from the sort of Brexit favoured by hardline Conservative MPs, who currently have a disproportionate influence on policy thanks to the party’s slim majority.
That has led certain forecasters to take a more bullish view on the currency, with Deutsche Bank reserving their long-held bearish call on sterling in the aftermath of the vote call.
US banking giant is also taking a positive view on the currency, with FX strategist Sheena Shah writing on Wednesday:
“Stabilisation of GBP has already started, which should aid inflows into the currency. Notably, FX reserve managers have started to move out of the EUR and into GBP. Our estimations suggest the market has priced in a lot of the negativity associated with Brexit, with today’s developments starting to reverse some of that pricing.”
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