The short relief rally on the French election result was not enough to push sterling past $1.30 on Monday, with the British currency trading in tight ranges as attention focused on this week’s Bank of England meeting and domestic election campaign. The pound has gained more than 3% against the dollar since Prime Minister: Theresa May three weeks ago called a surprise early national vote for June 8, reflecting hopes among investors it will give the Prime Minister a stronger hand to compromise in Brexit talks.
This recovery has stalled in the past week, even as the Prime Minister’s Conservatives won a decisive victory in local council elections on Thursday. In relevance to this event, this hints at the scale of doubts that remain on how the United Kingdom will deal with a historic break from Europe, and what is expected to be unstable talks on terms, whatever the outcome of next month’s election.
A strategist in Commerzbank in Frankfurt: Esther Reichelt said: ”There is no reason for the pound to really gain at the moment, because every time it does you have to stop and say that the risks ahead are still tremendous.” She said. “If you look at the pricing, the market is remarkably calm with regards to the election. That ignores that a lot of the risk is with the European Union, and that it may be hard for the Prime Minister to achieve a lot of what she is promising” She added.
The pound traded down 3% at $1.2939, having hit a high of $1.2990 for the first time in seven months in early trading in Asia, on Monday by 1600GMT. It gained 0.4% to 84.45 pence per euro as an overnight burst for the single currency after Emmanuel Macron’s expected victory in the French presidential election faded, in what analysts said was a classic “buy the rumour, sell the fact” move.