Sterling surges as Conservatives triumph in election
Michael Pinson, News Editor
13 Dec 2019, 1:54 p.m.
Pound Sterling rallied last night as the Conservatives secured their election victory, and decimated opposition parties in the general election.
The Conservatives won with by 364 seats to Labour’s 203 – the worst performance for Labour since 1935, and ending any leadership hopes for Jeremy Corbyn who will stand down in the next few months. Lib Dem leader Jo Swinson has also announced her intention to stand down, after losing her seat to the SNP.
The win means Boris Johnson will return to Downing Street with a powerful mandate, and the party support needed to push through his vision for Brexit and Britain for the next five years.
As voting stations across the country closed at 22:00, the exit poll was released, confirming the Conservative landslide. Within minutes Sterling surged against the Dollar; climbing three cents in 30 minutes, and reaching a peak of $1.35. The gold price reacted accordingly, sinking to £1,085 per ounce before midnight – the lowest it has been in almost six months.
Sterling dipped back slightly this morning as trading began, and markets digested the new political landscape, but is still at its highest against the Dollar since 2018. The FTSE 250 has also reached a record high today with UK stocks looking more appealing to investors.
With his new majority the PM can now begin work on his campaign promise to ‘get Brexit done’, and the Withdrawal Agreement will likely be passed through Parliament by next month.
Many have pointed out however that this is actually just step one; and simply marks the beginning of a new wave of negotiations on Britain’s future trade status with the EU. The PM has promised this can be finished by the end of 2020, a promise that many have said is unachievable. Even the EU’s negotiator, Michel Barnier, has called the timetable ‘unrealistic’.
For now, markets are riding high on the breaking of the parliamentary deadlock that has plagued Westminster since Theresa May’s ill-fated election of 2017. Many MPs have warned however that Boris Johnson’s intended 2020 timetable could actually result in a no-deal Brexit, as Boris Johnson seem unlikely to ask for the extension most believe will be needed.
Should a deal be agreed then Sterling will likely climb towards pre-referendum levels. If the PM fails to secure a trade deal with the EU however, then today’s Sterling boost could be short lived, dropping this time next year. In the short term however, it looks like a Merry Christmas for stock markets, and a potential buying opportunity for savvy gold investors.