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Pound Sterling exchange rate up 2% as Conservatives win UK Election

Friday 8th May 2015

Although the Pound showed remarkable resilience in the build up to the UK General Election, the currency fluctuated as the public cast their votes in what was being touted as the most unpredictable election in living memory.
However, as the first ballot boxes came in and the exit poll was published, the Pound rallied across the board and posted notable gains against both the Euro and US Dollar.
The exit poll saw the Conservatives taking 316 seats – a surprisingly large amount given that pre-election polls had put the Tories and Labour neck-and-neck. 
Prior to the release of the exit poll, the GBP/EUR exchange rate was trading in the region of 1.3526. The probable outcome of a Conservative-led government then saw the Pound surge to a high of 1.3836, marking the currency’s sharpest surge (2%) against the Euro for six years. 
The Pound consolidated gains as the forecast was then readjusted to give the Conservatives 329 seats, just over the 326 majority, and Labour 232.
The GBP/USD exchange rate also rallied, posting a 1.5% advance and pushing above the 1.55 level.
In terms of market stability, the most unwelcome outcome would have been a hung parliament resulting in a Labour-led coalition with the SNP. Now it appears that the Conservatives will not only remain in power but have the support to govern alone. The prospect of them continuing with the austerity measures which have helped get the British economy back on track has seen demand for the Pound rise.
Although the shadow of the in-out EU referendum promised by the Conservatives will darken the Pound’s long-term outlook, the currency may extend current gains if the Tories outright win is confirmed in the hours ahead.
*Market Analysis by Adam Solomon, Tor FX

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