General Election: Investors back Boris as pound soars

We’re now well aware of our next government. Boris Johnson’s Conservative Party have blown away the opposition.

It does seem though that investors were clear on Britain’s future even before results were announced in the early hours of this morning.

The exit poll predicted a Conservative majority of 368 seats, with Jeremy Corbyn’s Labour dropping significantly to 191.

And as soon as those figures came in at 10pm, the value of the pound against the dollar soared from $1.32 to $1.34, a huge increase in such a short time frame (shown below).

GBP/USD – taken from XE.com

More surprisingly, the pound’s value against the euro also soared from €1.18 €1.20 (shown below).

GBP/EUR – taken from XE.com

The FTSE 100 has also increased in value. The index shows the top 100 companies listed on the London Stock Exchange, and has increased by over 1.8% since 8am this morning (shown below).

FTSE 100 – taken from London Stock Exchange

So what does this mean? Is this just an initial fluctuation, or significant evidence of investment into a new, perhaps prosperous Britain?

Alessandro Scorolli is an award-winning economics graduate from Lancaster University and gave his initial thoughts on the financial situation.

Alessandro Scorolli

He said: “It means that people reacted positively to the result of the election. When it comes to currencies it is really hard to assess whether the trend will be long term, because of the high level of volatility in the market due to uncertainty and geopolitical turmoil (as in the Brexit outcome and so on).

“When it comes to main macro events such as elections, what really drives the fluctuations is the psychological response of people.”

Mr Scorrolli said the significant increase in the pound could be down to two reasons.

He said: “Either people are expecting a positive outlook for the future given the result of the elections or simply an initial excitement that is mainly driven by speculation that is going to revert soon.”

Trade negotiations are set to take shape as the Prime Minister hopes to have Brexit finalised by 31 January.