The pound rose against the euro and US dollar as local election results suggest that both the Conservatives and Labour have suffered huge losses. The Tories lost over 1,300 seats with Labour losing over 60 seats net. However, the Liberal Democrats have benefited from the losses to gain as many as 500 seats.
“Sterling emerged as one of Friday’s big winners,” said Connor Campbell, analyst at Spreadex. Cable’s 0.4 percent rise pushed it back to $1.308, after slipping under $1.30 earlier in the session, while hitting a fresh against the euro, €1.17-teasing one-month peak.
“The currency’s growth may be related to the local election results, one that say big losses for the Tories and Labour and significant gains for overtly pro-Remain parties like the Lib Dems and Greens.”
Sterling dropped after the Bank of England held interest rates at 0.75 percent but warned the state of the United Kingdom’s economy will be dependent on how Britain leaves the European Union.
The pound lost ground as the lender warned about the UK economic growth risking being buffeted in the near-term due to uncertainty in the polity. However, the BoE added the economy has been boosted from companies in the UK and the European Union building stocks ahead of recent Brexit deadlines.
The BoE also stated that it does not expect rates to reach 1 percent until Q3 2021.
The bank has forecasted the GDP in Britain to grow by 1.5 percent in 2019, a 1.2 percent increase in forecast in February.
Jeremy Cook, head of currency strategy at WorldFirst in London, believes that the pound is still significantly influenced by Brexit.
He said: “Sterling is not reacting to the bank’s latest decision.
“The pound takes its orders from Westminster, not the City at the moment.”
Sterling has struggled in recent weeks due to lack of Brexit movement, but managed to gain some ground after reports suggested the tone of Conservative and Labour talks had improved.
The pound was trading at $1.50 against the US dollar before the decision for Britain to leave the EU took place.
A Reuters poll recently revealed that analysts are forecasting the pound to go as high as $1.45 in the run-up to the new divorce date of 31 October, 2019.
On the lower end of predictions, currency watchers anticipated $1.23.
John Fahey at AIB said: “In the event of progress with regard to the Withdrawal Agreement being passed by the UK Parliament or if a parliamentary consensus emerges, sterling could rally.
“Any move that markets view as increasing the probability of a no-deal Brexit could see sterling come under pressure.”
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