Wednesday 4 December 2019 10:32 am

GBP/USD: Sterling hits seven-month high as traders hope for Tory election victory

The pound climbed to a seven-month high today as traders grew hopeful that the Conservatives would gain a majority at the upcoming General Election, bringing some certainty to the Brexit process.

Sterling topped $1.306 this morning before falling back slightly. The GBP/USD exchange rate was 0.4 per cent higher by 10.15am at $1.304, a level not seen since May.

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Most investors think a Tory majority at the 12 December poll would finally see Britain leave the European Union with a deal, bringing some much-needed certainty to the economy.

Prime Minister Boris Johnson’s party is still well ahead in the polls with just eight days until election day. A Yougov survey yesterday showed the Tories on 42 per cent and Labour on 33 per cent of the vote.

“Markets are becoming increasingly reassured that the prospect of a Labour government is slowly diminishing,” said Michael Hewson, chief market analyst at trading platform CMC Markets.

“While nothing is absolutely certain, the number of sterling short positions is slowly getting squeezed.”

Investors fear a Labour majority most of all, although the chances of it happening are remote. However, even in coalition many in the City fear that Labour would send the pound tumbling due to its radical agenda of nationalisations and public spending.

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Dean Turner, economist at UBS Wealth Management, said: “As we write, the election is Boris Johnson’s to lose. However, turnout rates, tactical votes, and the usual campaign trail pitfalls could all swing the final result.”

Yet he said he retains a “bullish medium to long-term view on sterling versus the US dollar and expect that GBP/USD will rise toward $1.38 by the end of next year”.